CONTENTS

MESSAGE TO OUR SHAREHOLDERS 2

COMPANY BACKGROUND 4

ORGANIZATION CHART 5

DATA ON DIRECTORS AND SUPERVISORS 6

INFORMATION ON PRESIDENT, EXECUTIVE VICE 8

PRESIDENTS, SENIOR VICE PRESIDENTS, VICE

PRESIDENT, MANAGERS OF DEPARTMENTS

REVIEW OF OPERATIONS 9

MARKET ANALYSIS 14

BUSINESS PLANS 19

INDEPENDENT AUDITOR’S REPORT 23

HEAD OFFICE AND BRANCHES 116 Message to our Shareholders

Over the past year Taiwan’s economic momentum was weakened by the reorganization of the Cabinet, amendment of the capital gains tax on securities transactions, rises in fuel and electricity prices, and food safety incidents, and growth in private consumption was limited by stagnant salaries and thee migration of middle-class workers to take up jobs overseas. Foreign trade suffered from American and Japanese policies designed to bring manufacturing back home and from the depreciation of the Japanese yen, and private investment was limited by industrial transition and sluggish external demand, so that potential investors adopted a wait-and-see attitude. Internationally the past year was full of turbulence, mainly as a result of former Federal Reserve Chairman Bernanke’s announcement in June of the idea that QE might possibly be withdrawn ahead of time, causing a large bounce in interest rates on U.S. government bonds, a withdrawal of international capital from emerging markets, and large fluctuations in their stock, bond, and foreign-exchange markets. This was followed by the U.S. government’s short-term shutdown in October, and in December began a formal gradual withdrawal of QE. Hot money in the international market began flowing back to the U.S. on a massive scale, causing the U.S. dollar to strengthen, the U.S. stock market to reach successive record highs, and the bond market to turn weak. All of this affected international economic conditions.

According to statistics compiled by the Directorate General of Budget, Accounting and Statistics (DGBAS), preliminary estimates put Taiwan’s economic growth in the fourth quarter of 2013 at 2.95%, bringing growth for the year as a whole to 2.11% and giving a per-capita GDP of US$20,958. With the expectation of continuing moderate recovery in the United States, the end of recession in Europe, a loose-money policy in Japan, and stable and balanced growth in mainland China in 2014, plus a strengthening of the domestic consumption atmosphere, export-driven demand and the warming up of domestic demand will lead to improved performance by Taiwan’s economy. DGBAS forecasts the island’s economic growth in 2014 at 2.82% and a continued growth in per-capita GDP to US$21,153.

The Bank’s before-tax income in 2013 reached NT$4.748 billion (after-tax income was NT$4.062 billion), yielding an ROE of 12%. This performance not only exceeded the Bank’s internal targets but was above the market average. We carried out business readjustment in 2013 under the strategic focus of “Stable Growth, Organizational Restructuring” and, in contrast to the large-scale growth of the previous two years, our loan business expanded by 6% and profitability effectively improved, with the loan-deposit interest-rate spread increasing by 2bps. Besides the loan business, we moved to reinforce our financial structure by vigorously promoting growth in fee income; as a result, the Bank’s net fee income rose 11% in 2013, with especially good performance in the wealth management and forex businesses. Our TMU business also turned in an outstanding performance in 2013, with profit skyrocketing 288%.

In terms of asset quality, bank-wide reserves against bad debts were boosted by NT$470 million over 2012. To maintain good asset quality, we wrote off a large amount of bad loans in 2013 in order to lower the NPL ratio and allocated a large amount of reserves to increase coverage. By the end of 2013 the Bank’s NPL ratio had fallen to 0.42% and coverage had risen to 265.57%, reflecting a large improvement in asset quality.

In May of 2014, the Bank’s credit ratings as assessed by the Taiwan Ratings Co. were as follows: outlook stable, long-term credit rating “twAA-,” and short-term credit rating “twA-1+.”

2 In 2014, with the U.S. debt ceiling issue having been resolved, the economy continuously warming up, QE gradually being withdrawn, and interest rate rises not expected before the last half of next year at the earliest, U.S. GDP growth is projected to be better this year than in 2013. The European economy will shake off its recession and, although the performances of the different economies will still show divergence, economic growth in the euro zone is predicted to switch from negative to positive this year. The government of mainland China will seek balance as it carries out job preservation, risk control, and reform, and that country’s GDP growth this year is projected to remain the same as in 2013. Japan is the country with the most clear- cut loose-money policy, and this year it may expand its asset purchases to offset the impact on consumption tax; Japan’s GDP growth, too, is expected to remain the same as last year. In Taiwan, with the seven-in-one elections coming up at the end of the year, the increase in private consumption and government spending will give GDP momentum a boost and, because of the improved international and domestic environments, economic growth is expected to be better this year than last.

The Bank will continue its efforts to enhance its financial quality in 2014. First of all, we will maintain our current momentum for growth in deposits and loans so as to consolidate our operating base by keeping up our capital adequacy ratio while, at the same time, working toward the strategic objectives of assured stable profit growth through continuous adjustment of the profit structure by lowering capital costs, readjusting the loan structure, and increasing fee income. We will also carry through with business plans such as the vigorous implementation of cash management, maintenance of high growth momentum in the consumer loan business, enhancement of credit card market share, strengthening of the wealth management business, deepening of the foreign-exchange business, and development of the TMU business. In the field of asset quality, we will coordinate with the revision of the law by boosting the provision for losses on Tier 1 credit assets, ahead of the required time, from 0.5% to 1%. The Bank will allocate approximately NT$700 million in additional reserves against bad loans so as to prepare a healthy operating capability to cope with possible economic downturns in the future. In overseas markets we will speed up our deployment in Southeast Asia; this year we hope to set up a branch in Vietnam and a representative office in Myanmar, and in the future we will plan for the establishment of a branch in Cambodia and representative office in China so as to continue our expansion and further cultivate customers among Taiwanese businesses in Southeast Asia. To take full advantage of the synergies of holding-company cross-marketing, we will continue reinforcing our cooperation with other member firms of the financial holding group in order to enhance the benefit of financial operations; at the same time, we will strengthen the development of new types of financial businesses and the introduction of new financial-planning products that satisfy the needs of different customer groups, allowing us to expand our operational scale and offer a complete range of financial services.

With the care and support with which our customers, our parent financial holding company, and our directors and supervisors have favored us over the years, the Shin Kong Bank will continue working ceaselessly to boost its operating performance to new heights so that we can pay something back to our parent financial holding company and to society.

3 Company Background

The Shin Kong Bank was reorganized as a commercial bank in January of 1997. Its forerunner started out in April of 1918 as the Manka Credit Union, organized by a group of gentry to serve as the financial needs of the local people.

With the promulgation of new laws by the government of the Republic of China following Taiwan’s restoration to Chinese administration in July 1945, the Manka Credit Union received permission to reorganize into the Taipei Manka Credit Cooperative. In response to a further revision of the law, the credit cooperative was reorganized again in June of 1966, transforming it from a limited liability organization into a guaranteed liability organization under the name Guaranteed Liability Taipei Third Credit Cooperative—the “Taipei Third Credit Cooperative”—as it existed up until its reorganization into a commercial bank.

After its reorganization into a bank the Company worked in line with government policy to help resolve financial problems by taking over the Second Hsinchu Credit Cooperative in 1997, creating Taiwan’s first example of a private bank absorbing a credit cooperative, and the following year taking over the Eighth Taichung Credit Cooperative, thereby expanding its operations into central Taiwan. At the first of September 2001 the Bank absorbed the Second Chiayi Credit Cooperative and, pursuant to the operation of the Financial Reconstruction Fund, took over the Gangshan Credit Cooperative in the middle of the same month. This expanded the Bank’s operations to a total of 80 branches throughout Taiwan.

The Bank responded to the trends of development in the financial market and to the government policy of financial reform by joining the Shin Kong Financial Holding Co. as a wholly owned subsidiary on Oct. 3, 2005. On Dec. 31 that same year the financial holding company moved to expand the integrated operating scale of its banking platform and enhance its competitiveness by merging the Macoto Bank with the Taiwan Shin Kong Commercial Bank (itself the result of the July 1, 2000 merger between the Taichung Sixth Credit Cooperative and the First Pingtung Credit Cooperative to form the United- Credit Commercial Bank, which was renamed the Taiwan Shin Kong Commercial Bank on Nov. 15, 2004). Today the surviving entity, the Shin Kong Commercial Bank, operates 105 branches all over Taiwan.

In the future, the Bank will work to promote corporate banking, the development of the foreign exchange business, and the establishment of overseas business bases (the Ho Chi Minh City Representative Office in Vietnam was established on Dec. 20, 2007; the Hong Kong Branch began operating on May 6, 2011; an application to open the Binh Duong Branch was submitted to the State Bank of Vietnam in November of 2013; and permission was received from Taiwan’s Financial Supervisory Commission on Dec. 24, 2013 to set up a representative office in Yangon, Myanmar) in order to provide a more diverse range of financial services. The Bank will also cooperate with the other enterprises of the financial holding group to realize marketing and promotion synergies, thereby greatly enhancing the benefit of financial operations, substantively advancing development of the banking business, reinforcing the scale of operations, and providing a more complete range of financial services.

4 Organization Chart

Organizational structure approved by the 64th meeting of the Fourth Board of Directors on Dec. 27, 2006 and implemented on Jan. 1, 2007; first revision approved by the 129th meeting of the Fourth Board of Directors on Apr. 2, 2008; second revision approved by the 19th meeting of the Fifth Board of Directors on Feb. 18, 2009; third revision approved by the 89th meeting of the Fifth Board of Directors on June 30, 2010; fourth revision approved by the 144th meeting of the Fifth Board of Directors on July 27, 2011; fifth revision approved by the 12th meeting of the Sixth Board of Directors on Jan. 18, 2012; sixth revision approved by the 28th meeting of the Sixth Board of Directors on May 16, 2012; seventh revision approved by the 32nd meeting of the Sixth Board of Directors on June 27, 2012; eighth revision approved by the 56th meeting of the Sixth Board of Directors on Nov. 28, 2012 and ninth revision approved by the 65th meeting of the Sixth Board of Directors on Jan. 30, 2013.

Compensation Trust Asset Assessment Committee Committee Board of Directors Secretary of Board of Directors

Chairman Credit Committee Investment Committee

Sta Conduct Review and Information Security Sta Performance Appraisal President Committee Committee Non-performing Loans ALM Committee Management Executive Vice President Risk Management Consumer Protection Committee Committee Group Wealth Management & Financial Market Corporate Banking & Business Service Group Consumer Banking Group Chief Auditor Risk Management Group Administrative Management Group Information Technology Group Chief of Legal A airs Head Institution g Auditing Dept. Remedial Management Dept. General A airs and Adm. Dept Dept. Finance and Accounting Dept. Wealth Management Dept. Trust Dept. Secretary Dept. Information Tech. Administration Dept. Information Tech. Service Dept. Credit Review Dept. Risk Management Dept. Human Resources Dept. Treasury Dept. Customer Service Dept. Credit Card Dept. Personal and Mortgage Loan Dept. Consumer Banking Dept. O shore Banking Unit (OBU) International Banking Dept. Corp. Banking Dept. Business Service Dept.

.

. Business Dept. Branches Overseas Domestic and

5 Data on Directors and Supervisors Up to March 31, 2014

Current Bank & Title Name Prime (Education) Experiences Other Positions

President, Taiwan Shin Kong Commercial Bank Chairman of Taiwan Co., Ltd. Shin Kong Commercial President, United-Credit Commercial Bank Bank Co., Ltd. Chairman Tseng-Chang Lee Department of Agricultural Economics, Chairman of Shin Kong National Taiwan University Insurance Agency Co., EMBA, National Sun Yat-Sen University Ltd.

President of Taiwan Shin Vice President & President in charge of the Kong Commercial Bank Asia-Pacific Market, Mega International Co., Ltd. Director Chin Yuan Lai Commercial Bank Director of Shin Kong Department of Economics, Tunghai University Insurance Agency Co., Ltd.

Director, Shin Kong Financial Holding Co., Ltd. Director of Shin Kong Director Po-Han Lin Director, Shin Kong Insurance Co., Ltd. Life Insurance Co., Ltd. Master, Department of Economics, Meiji University (Japan)

Managing Director, Trition Management Corp. President, Centillion Venture Capital Corp. Director, Shin Kong Life Insurance Co., Ltd. Supervisor of Shin Kong Director Michael S.C. Hung Director, Shin Kong Financial Holding Co., Life Insurance Co., Ltd. Ltd. Director, Shin Kong Insurance Co., Ltd. MBA, Chaminade University of Honolulu

Director, Taiwan Shin Kong Security Co., Ltd. Director of Chia Pang Director Benson Wu Director, Shin Kong Insurance Co., Ltd. Investment Co., Ltd. Bi-Master, University of Southern California

Chairman of Taiwan President, Taiwan Shin Kong Security Co., Ltd. Director Po-Fong Lin Shin Kong Security Co., BA, College of Law, National Taiwan University Ltd.

6 Current Bank & Title Name Prime (Education) Experiences Other Positions

Vice President, Corporate Planning Dept., Shin Kong Financial Holding Co., Ltd. Director, Shin Kong Director Yi-Chung Hsieh Senior Manager, Secretariat Div., Shin Kong Leasing Corp. (Suzhou) Life Insurance Co., Ltd. MBA, University of North Texas

Vice President, Risk Management Dept., Shin Supervisor of Shin Kong Kong Financial Holding Co., Ltd. Director Sheng-Yung Yang Investment Trust Co., Dept. of Accountancy, National Cheng Kung Ltd. University

General Manager, International Commercial Bank of China, New York Branch First Vice President, Mega International Independent Director Independent Sheng Yih Hu Commercial Bank of Shin Kong Life Director Master degree in Economics at Yale University, Insurance Co., Ltd. and a Master degree & a Doctoral degree at Chinese Culture University

Chairman, Trust Association of R.O.C. Chairman & President, Hua Nan Financial Independent Director, Independent Holdings, Taiwan David J.Y. Lee Shin Kong Financial Director Managing Director & President, Hua Nan Holding Co., Ltd. Commercial Bank Dept. of Economics, Taiwan University

Chairman of the Board and Managing Director, Taichung Sixth Credit Cooperative, Supervisor Chung-Ho Chen Managing Director, United-Credit Commercial - Bank National Taichung Second Senior High School

Project Manager, Shin Kong Life Insurance Company Supervisor Sung-Tsung Chen - Director, Shin Kong Bank Dept. of Accounting, Tamkang University

7 Information on President, Executive Vice Presidents, Senior Vice Presidents, Vice Presidents, and Managers of Departments

Title Name Chairman Tseng-Chang Lee President Chin Yuan Lai Executive Vice President Hung Jen Huang Executive Vice President Ching Tai Huang Senior Vice President Min-Yi Huang Senior Vice President Wen Ping Lin Chief Auditor Mei Ching Yang Chief Legal Officer Daniel J. Chen Chief Technology Officer Ivan Chang Chief Human Resources Officer Kathy Wu Senior Vice President Po-Yang Chiu Vice President, Business Service Dept. Elaine Chen Senior Vice President, Corporate Banking Dept. Cho Su Huang Vice President, General Affairs and Adm. Dept. Cheng Tsung Kuo Vice President, Treasury Dept. Jerry Lin Vice President, Information Technology Service Dept. Yi-Sun Lee Vice President, Consumer Banking Dept. Vincent Lin Vice President, Finance & Accounting Dept. Judy Lin Vice President, Credit Card Dept. Yi Tsuei Hsu Vice President, Personal & Mortgage Loan Dept. Sophia Hsu Vice President, Remedial Management Dept. Ho Chuan Huang Vice President, Customer Service Dept. Ma-Li Lee Vice President, Trust Dept. Fea Chin Huang Vice President, Secretary Div. Chin-Chu Sung Vice President, Wealth Management Dept. Sunny Lin Vice President, Risk Management Dept. Shu Feng Hsueh Vice President, Credit Review Dept. Yu Su Huang Vice President, Information Technology Administration Dept. Gloria Yang Vice President, International Banking Dept. Chen Chi Shieh Vice President, Hong Kong Branch Joe Hsiao Assistant Vice President, Ho Chi Minh City Representative Office Bryan Peng

As of June 1, 2014

8 Review of Operations

1. Deposits Deposits in the Bank in 2013 totaled NT$614,424 million (excluding interbank deposits), an increase of NT$58,303 million over 2012 for a growth of 10.48%.

Deposit balances for the past two years Unit: NT$ million

Items 2013 2012 Increase (Decrease) Checking account deposits 6,454 7,332 (878) Government bank deposits 151 166 (15) Demand deposit Demand deposits 98,790 85,681 13,109 Saving-Demand deposits 136,246 124,403 11,843 Subtotal 241,641 217,582 24,059 Time deposits 220,626 177,666 42,960 Time deposit Savings Time deposits 152,157 160,873 (8,716) Subtotal 372,783 338,539 34,244 Total deposits 614,424 556,121 58,303

Note: The information referred to above to be in conformity with the guideline of the International Financial Reporting Statements (IFRS) endorsed by the Financial Supervisory Commission of the Republic of China.

2. Loans The Bank’s outstanding loans for 2013 stood at NT$449,549 million, an increase of NT$23,746 million over 2012 for a growth of 5.58%.

Loans outstanding for the past two years Unit: NT$ million

Increase (Decrease) Items 2013 Amount 2012 Amount Amount Secured loans 306,891 283,516 23,375 Unsecured loans 142,658 142,287 371 Total loans 449,549 425,803 23,746 Total Loans to Total Assets 64.85% 67.18%

3. Wealth Management The Bank’s income from wealth management in 2013 grew 13.4%, to NT$168,900 million. The introduction of new offshore structured products and other fixed-income products and the phasing out of old ones in 2012, together with the diversification of types of products and currencies, along with the focus of investors on insurance products with installment payments, resulted in a major enhancement of wealth-management performance. Non-discretionary money trust funds under management amounted to NT$13,800 million, yielding a market share of about 3.9%. This put Shin Kong Bank in 9th place in Taiwan’s banking industry in this business.

4. Consumer Banking The Bank holds to a strategy of vigorous action with stability, upgrading profitability while maintaining good loan quality. The amount of new small unsecured loans extended during the year grew 11.1% compared with the previous year, and at

9 year-end the outstanding amount of these loans was up 9.9% over the year before. Because of cutthroat competition in the industry, new auto loans and the amount outstanding at the end of the year both registered declines. For changes in the consumer banking business during the past two years, see the following chart.

Unit: NT$ million

Unsecured personal Loans Auto-Loans Credited Amount Year-end Balance Credited Amount Year-end Balance 2012 17,119 27,981 2,954 5,150 2013 19,080 30,759 2,569 4,502 Change 1,961 2,778 (385) (648)

Note: The Bank stopped issuing new cash cards in November of 2005, and the following month initiated active efforts to recover amounts outstanding on old cards. At the end of December 2013, the total amount outstanding on the Bank’s cash cards stood at NT$7.6 million.

5. Corporate Banking (1) Scope of Business a. Short-, medium-, and long-term loans. b. Discounting of negotiable instruments. c. Acceptance of commercial bills. d. Issuance of domestic letters of credit. e. Domestic guarantees. f. Purchasing of exporters’ receivables and transfer of the purchased receivables to factoring companies. g. Purchasing of domestic receivables produced by domestic sales by domestic enterprises.

(2) Status of Operations in 2013 Corporate loans outstanding at the end of 2013 totaled NT$238,428 million; compared with the end of 2012 this was an increase of NT$5,347 million, for a growth of 2.29%.

Unit: NT$ billion

Increase (Decrease) Items 2013 Amount 2012 Amount Amount

Corporate Banking 238.428 233.081 5.347 (Excluding Hong Kong Branch)

10 6. Personal and Mortgage Loans (1) Scope of Business The extension of personal loans secured by real estate or securities includes the following: (a) Personal home loans. (b) Personal home-improvement loans. (c) Personal working-capital loans. (d) Other personal loans secured by real estate or securities. (2) Status of Operations in 2013 In the Bank’s personal and real-estate loan business in 2013, interest-bearing loans outstanding totaled NT$169.056 billion; this was an increase of NT$13.415 billion over 2012, for a growth of 8.62%. Operating income for the year amounted to NT$3.985 billion, an increase of NT$330 million over the year before for a growth of 9.02%. The non- performing loan ratio dropped to 0.25%. The increase in overdue receivables was caused by the Bank’s refusal to agree to the continued extension of negotiation cases in the amount of NT$57,654,000, for which extensions had already been negotiated many times. Changes in business over the past two years are shown in the following chart:

Unit: NT$ thousand

Items 2013 2012 Increase (Decrease) % of Growth

Interest-bearing loans outstanding 169,056,393 155,641,070 13,415,323 8.62%

Non-accrual loans outstanding 249,356 159,846 89,510 56.00%

Outstanding loan 169,305,749 155,800,916 13,504,833 8.67%

Past due loan ratio (over 90 days) 0.25% 0.26% -0.01% -3.85%

7. Trust Business The Bank sold NT$6,481 million worth of domestic non-discretionary trust funds in 2013, and investment of non- discretionary money trust funds in overseas funds during the year (including sales by the OBU) totaled NT$18,168 million, investment of non-discretionary trust funds in overseas bonds (including sales by the OBU) amounted to NT$19,169 million, The value of securities certified in 2013 was NT$5,163 million, the value of securities recertified was NT$3 million, the value of other money trust fund assets was NT$1,524 million, the value of stock ownership assets was NT$19 million, the value of real estate trust assets was NT$20,142 million, and the value of funds under custodianship was NT$1,876 million. Changes in these trust funds compared with 2012 are shown in the following chart:

11 Unit: NT$ million

Items 2013 2012 Increase (Decrease)

Non-discretionary domestic trust funds 6,481 4,470 2,011

Non-discretionary overseas trust funds (including OBU) 18,168 18,367 (199)

Non-discretionary overseas bond funds (including OBU) 19,169 16,302 2,867

Securities certification 5,163 5,740 (577)

Securities recertification 3 305 (302)

Other trust funds assets 1,524 781 743

Stock ownership trust funds assets 19 0 19

Securities trust funds 0 0 0

Debt of money claim trusts 0 0 0

Real estate trust assets 20,142 21,400 (1,258)

Trust Funds under custodianship 1,876 1,906 (30)

8. Investment Business Unit: NT$ Thousand

December 31, 2013 December 31, 2012 Increase Items Amount % Amount % (Decrease)

Bonds 30,388,969 22.93% 20,213,115 15.25% 10,175,854

Financial Debenture 0 0.00% 0 0.00% 0

Corporate Bonds 2,429,626 1.83% 969,706 0.73% 1,459,920

Stocks 1,981,725 1.50% 2,701,115 2.04% (719,390)

Beneficiary Certification 1,437,613 1.08% 1,604,416 1.21% (166,803)

Beneficiary Securities 171,614 0.13% 167,369 0.13% 4,245

Overseas Marketable Securities 18,696,538 14.11% 10,245,855 7.73% 8,450,683

Credit-combination product 1,248,050 0.94% 1,167,980 0.88% 80,070

Inter bank call loan 2,753,955 2.08% 34,169,796 25.79% (31,415,841)

Re-deposits 73,400,000 55.40% 78,200,000 46.24% (4,800,000)

Total 132,508,090 100.00% 149,439,352 100.00% (16,931,262)

12 9. International Banking Business The amount of import, export, and overseas remittance transactions carried out bank-wide in 2013 totaled US$26,357 million, an increase of US$1,566 million over the year before for a growth of 6.3%. Foreign-currency deposits stood at US$2,675 million at the end of the year, up US$537 million for a growth of 25%.

10. Credit cards Business The number of SKB-issued cards in circulation in 2013 stood at 899,000, with 455,000 of the cards being valid; consumption using these cards during the year totaled NT$43.699 billion, up 6.47% over 2012 (NT$40.870 billion). To accommodate the rapid development of the credit card market, provide customers with incentives to use their cards, and satisfy the needs of different consumer groups, the Bank continuously launched campaigns based on daily consumption, including Internet shopping, restaurant discounts, and discounts on store shopping and cinema tickets. The Bank also worked with the seasonal activities of department stores to offer a variety of gifts with purchases of certain amounts to encourage customers to use credit cards and boost the Bank’s fee income. To expand the scale of the credit card market, co-branded cards were issued in together with Taiwan’s top department store chain, Shin Kong Mitsukoshi, providing special offers in combination with the Shin Kong Financial Holding Group and its affiliated enterprises, including Shin Kong Department Stores, to encourage customer groups in northern, central, and southern Taiwan to apply for the cards. More than 150,000 of the Shin Kong Mitsukoshi cards had been issued by the end of 2013; in the future, special offers for use of the cards will be continued in order to cultivate existing customers and develop new ones.

Items 2013 2012 Increase (Decrease) % of Change

Cards in circulation 899,106 826,840 72,266 8.04%

Valid cards in circulation 455,407 422,049 33,358 7.32%

Aggregate credit amount (NT$ thousand) 43,698,915 40,870,139 2,828,776 6.47%

Revolving credit-card loans outstanding 2,535,287 2,966,974 (431,687) (17.03%) (NT$ thousand)

Bad Debt return ratio -0.66% -0.74% (0.08%)

13 Market Analysis

The potential effects of Taiwan’s major economic indexes on future supply and demand conditions in the market are described briefly below:

1. Supply (1) Status of financial institutions: According to statistics compiled by the Central Bank, Taiwan’s financial institutions had a total of 6,478 business units at the end of December 2013, of which 428 were headquarters units and 6,050 were branches. This indicates that fierce price competition among financial institutions will continue for the short term, and that small and medium-sized banks without the backing of financial holding company resources will face challenges that are more severe than ever.

Year Total Financial Institutions Total Branches

2009 428 5,973

2010 425 5,989

2011 425 6,016

2012 427 6,034

2013 428 6,050

Data Source: “Monthly Report of Financial Statistics in Taiwan, Republic of China”, Central Bank

(2) Deposits: Deposits in all banks in Taiwan at the end of December 2013 totaled NT$27,101 billion, an increase of 5.92% over a year earlier.

2. Demand Taiwan’s overall economy in 2013 showed improved growth over the previous year. According to statistics compiled by the Directorate General of Budget, Accounting and Statistics, the domestic economy expanded an a preliminarily estimated rate of 2.95%, which combined with the previous three quarters gave an annual growth rate of 2.11% for the year and an average GDP of US$20,958. With ongoing moderate recovery in the United States, the European economy breaking away from recession, the Japanese adopting a loose-money policy, and the mainland Chinese economy growing at a stable and balanced pace, along with the improved atmosphere in domestic consumption, export-driven demand, and the heating up of domestic demand, Taiwan’s economic performance in 2014 is expected to show improvement over 2013.

3. Growth Prospects In the U.S., with the debt ceiling crisis having been resolved and the economy continuing to recover at a modest pace, QE gradually being phased out, and interest rates not expected to increase until the last half of next year at the earliest, GDP growth is expected to be better this year than last. The European economy will break away from recession and, despite differences in the different countries, GDP in the euro zone is predicted to switch from negative to positive growth. The Chinese government will seek assured employment, risk control, and balance amid reform, and economic growth in China this year is expected to be unchanged from 2013. Japan is the country with the most obvious loose-money policy, and this

14 year may expand its asset purchases to offset the impact of the new consumption tax; Japan’s GDP growth, too, expected to remain the same as last year. In Taiwan, with the seven-in-one elections coming at the end of the year, the domestic economy can depend on increased private consumption and government spending to stimulate GDP momentum and, overall, economic growth can be expected to be better this year than last.

4. Favorable and Unfavorable Factors in Growth Prospects (1) Favorable Factors a. External Environment: (a) The signing of the cross-strait MOU for financial services and the government’s opening up of cross-strait financial businesses will benefit the development of the finance industry. (b) The merger of financial institutions will effective reduce the over-banking problem caused by an excessive number of banks. (c) Cross-industry operations and horizontal alliances will facilitate the diversified development of banking. (d) The opening up of new financial products will increase the demand for related talent and facilitate the development of more types of products designed to provide customers with a more complete range of financial services, and will allow the more efficient utilization of bank capital. (e) The rapid advancement of technology and the Internet will facilitate the development of e-banking services, lowering banks’ operating costs; in addition, the development of virtual banking channels will help infinitely extend the reach of banking operations. b. Internal Advantage: (a) The branch network is widely spread but concentrated primarily in the economically vibrant Greater Taipei area, reinforcing the Bank’s competitiveness for business expansion. (b) Integrating the resources of the financial holding group enhances cross-marketing capabilities and expresses economies of scale. (c) High-quality human resources reinforce the Bank’s capabilities for financial innovation and product development.

(2) Unfavorable Factors a. Taiwan has too many banks and price competition continues to exist, reducing the profitability for banks. b. The rise of consumer consciousness and customers’ constantly changing financial-planning needs weaken customer loyalty and boost customer turnover. c. The limited size of the domestic market and the excessive number of bank branches affect profit growth capability.

5. Counterstrategies Adopted by Shin Kong Bank In the face of the current and future financial market, the Shin Kong Bank’s major operational strategies for 2014 include the following: ① Emphasis on capital adequacy and choice of outstanding companies as loan customers, ① stabilization of loan quality and strengthening of risk management, ① raising of the demand deposit ratio and control of interest rates on deposits, ① increasing of fee income and heightening of non-interest income, ① development of e-banking and institution of diversified services, and ① deep cultivation of the Asia-Pacific market and vigorous expansion of overseas business locations.

In the development of the corporate banking business, in 2013 the Bank continued following the government policy of

15 nurturing small and medium enterprises (SMEs) in expanding its customer base, and adjusted its loan structure to expand the interest spread. Because of the small economic scale of SMEs, however, their risk is relatively high; when the Bank seeks loan customers among SMEs, therefore, in addition to strengthening the examination of their risk control mechanisms the Industry Investigation Team is mobilized to find customers that possess industrial competitiveness, and on-site visits to companies on both sides of the Taiwan Strait as well as post-loan management were strengthened with the aim of assuring good loan quality. Further, the TMU and cash management businesses were used to increase risk-hedging channels for, and the loyalty of, customers; the concept of integrated marketing was reinforced; and overall customer contribution was upgraded. In 2014, the Bank’s corporate banking strategy will be concentrated on increasing the ratio of non-interest income through the following concrete methods: (1) Continuous reinforcement of the integration of the Global E-Banking (GEB) business platform and the expansion of cash management and other services so as to heighten the ratio of demand deposits. (2) Increasing of fee income, especially TMU fee income and trust fee income, so as to heighten income that is not generated by loans. (3) Maintenance of the cash adequacy ratio and the extension of loans to preferred customers.

Overview of Research on Financial Products, and Business Development 1. Research and Development Spending for the Past Two Years (1) The Bank began planning for the installation of a Credit Investigation Management System in 2007. This project, calling for six years and an investment of nearly NT$100 million to complete, was designed to digitize bank-wide credit- investigation operations. Corporate and small-loan credit investigation and real estate appraisal operations went online starting in the last half of 2009. Home and personal loan credit investigation operations, and the collateral management system, followed in the last half of 2011. The collateral quality control system followed in February of 2012. Planning for car loan and loan-review operations began in 2012, and these operations too went online in the first half of 2013. This completed the installation of the Credit Investigation Management System. (2) To upgrade the risk management mechanism and establish a credit-rating system, the Bank invested almost NT$30 million in the installation of a small loan, credit card, home loan, and SME business scorecard system (including application and behavior scorecards), which was completed in 2007. (3) The Bank invested nearly NT$30 million in a market risk management system in coordination with the parent financial holding company’s establishment of the Shin Kong Financial Holding Market Risk Management System, and in February of 2013 completed the establishment of a front- and middle-office risk monitoring and management system for derivative products, setting up related risk assessment and quota control mechanisms to make information on the Bank’s financial products (investment, foreign exchange, and derivative products) more transparent and bringing risk under optimum control. (4) To upgrade the Bank’s operational risk management, operational risk management tools were implemented in each unit and approval for the use of standardized approach mechanisms for operational risk and capital requirements was received from the competent authority in January of 2010. The Bank will continue investing manpower and expenditures in the establishment of mechanisms that will lead to advanced risk management methods.

2. Research Results for the Past Two Years (1) Risk Management Business a. Credit Risk

16 (a) Corporate and small loan credit operations and real estate assessment operations were successively put online with the e-loan system in the first half of 2009; the home loan credit operating system was added in November of 2011, and the collateral quality control system followed in February of 2012. Installation of the review operating system began in the last half of 2012, and the system went online in the first half of 2013. That completed the establishment of the credit management system, and of the installation of a basic platform for the collection of loan- related credit risk information. (b) The credit risk grading mechanism: The Bank began setting up credit risk grading mechanisms in 2006, and up to this year (2013) scorecards (application and behavior scorecards) had been established for small loans, credit cards, home loans, and small and medium business. Continued investment of manpower and funds will continue to be invested in this area in the future with the aim of strengthening the management of loan assets. b. Market Risk From 2008 through June 2010 the Bank worked on establishment of the Shin Kong Financial Holding Risk Management System in coordination with the progress of the parent financial holding company’s project, and in February 2013 completed the establishment of front- and middle-office risk control management mechanisms for derivative products, successively setting up the related risk assessment and quota management mechanisms. This will make information on the Bank’s financial products (investment, foreign exchange, and derivatives) more transparent and assure the optimal control of risk. c. Operational Risk In January of 2010 the Bank received permission from the competent authority to use standardized approach mechanisms and capital requirements for operational risk, and the related operational risk management tools have been implemented in the various units. In the future, the Bank will continue investing manpower and funds to upgrade risk management mechanisms and move in the direction of advanced capital appropriation.

3. Future R&D Plans (1) Development of portfolio products, linking deposits, loans, insurance, and investment products together to provide customers with product choices offering greater diversity and flexibility. (2) Development of domestic third-party payment and cross-border payment and collection services a. In response to the needs of the cross-strait market, planning will be carried out for new forms of cross-border Internet payment and collection services that allow consumers in mainland China to purchase Taiwanese products via the Internet, thereby opening up broader market opportunities for products with the unique characteristics of Taiwan. b. To meet the needs of domestic e-commerce, planning will be carried out for the third-party payment business providing escrow and Internet stored-value payment account services for Internet purchases, thereby protecting the interests of both buyer and seller. (3) Progress in the direction of the Basil III capital requirement approach, thereby enhancing the Bank’s risk management mechanism and asset quality.

Short-Medium- and Long terms Business Development Plans 1. Short-term Goals (1) The functions of e-banking services will be reinforced, with diversified e-banking transaction functions and a service platform being developed to enhance the quality of customer service and lower transaction costs while heightening the

17 competitive advantage of the Bank’s virtual channels and facilitating the strengthened development of demand deposits. (2) The Global e-Banking network will continue to be promoted in order to develop the cash management business, attract corporate fund flows, and expand the operating scale.

2. Medium- and- Long-term Goals (1) A standardized, centralized, and automated central operations center will be established to reinforce customer services, satisfy customer needs, and lower operating costs by making overall operations more efficient.

18 Business Plans

I. Strategic Goals 1. Emphasis on capital adequacy and strict selection of loan recipients. 2. Stable loan quality and strengthened risk management. 3. Heightened demand deposit ratio and control of demand deposit interest. 4. Increased fee income and heightened non-interest income. 5. Development of e-banking and institution of diversified services. 6. Cultivation of the Asia-Pacific market and vigorous expansion of overseas business locations.

II. Operating Plans for 2014 1. Wealth Management Business a. Promotion of the Joint Marketing Model for the Insurance Business (a) Use of joint-use life-insurance opportunity and training system at bank-end, making it unnecessary to procure equipment and lowering the Bank’s development costs. (b) Improvement of the document delivery process and acceleration of the new-contract review procedure so as to enhance the Bank’s service quality. (c) Firm grasp of the progress of customers’ policies and allocation of assets by financial planners to heighten overall customer benefit. b. Addition of new customer segments through the government’s promotion of free economic pilot zones: The competent authority’s large-scale expansion of OBU businesses and the products they can handle will strengthen the momentum of financial businesses and attract foreign investors; this, hopefully, will facilitate the joint development of high-net-asset customers together with corporate banking resources, helping the Bank to continue expanding its high-asset customer segment and enlarging the scale of its wealth management assets. c. Inauguration of the Wealth Management Business at the Hong Kong Branch: The Hong Kong Branch received permission from the Hong Kong Monetary Authority (HKMA) in October 2013 to engage in the wealth management business, and Taiwan’s Financial Supervisory Commission (FSC) has also granted its approval. The financial management staff there is gradually being filled; the business is expected to be inaugurated in May 2014, and the performance of the wealth management business in the Hong Kong area will strengthen step by step.

2. Consumer Banking Business The Bank will continue its vigorous development of the consumer banking business at a stable pace with the aim of augmenting profits and in the hope of creating a consumer banking performance superior to that of 2013. The following operating plans will be implemented in 2014: a. Continued recruitment of consumer business personnel and upgrading of productivity in order to expand the scale of the Bank’s consumer banking business The Bank will continue recruiting consumer banking personnel to handle small unsecured loans and car loans, and will strengthen training with the aim of upgrading the quality and productivity of consumer banking personnel so as to manifest the Bank’s superior service quality and expand the scale of the consumer banking business. b. Strict review of consumer loan cases to reduce non-performing loans and enhance asset quality Consumer loans will be reviewed strictly, quality customers will be vigorously pursued, and loan risk control will be strengthened so as to reduce non-performing loans; further, the credit scorecard grading system will be used to upgrade the overall asset quality of consumer loans.

19 c. The Bank will provide outstanding service quality and expand the scale of the consumer banking business so as to increase overall profitability The provision of outstanding service quality will be continued, old customers will be retained, and new customer sources will be developed so as to expand the scale of the consumer banking business and upgrade interest income and risk-free fee income, thereby increasing overall profitability of consumer banking products. d. Continuous stable operation of the auto-loan business and vigorous development of loan sources through auto dealers In addition to the continued development of business with auto dealers, this year the Bank will also work vigorously to add new loan programs; at the same time, it will continue strengthening the control of business costs and reducing non-performing loans, with equal emphasis on the development of new sources of business and the reduction of expenditures so as to create optimum profits for the Bank.

3. Corporate Banking Business a. Vigorous adjustment of the loan structure quality The core strategies of growth stabilization and structural adjustment will be continued and the allocation of loan quotas, such as those for large loans and SME loans, will be optimized. b. Upgrading of return on loan assets (a) In regard to loan customers, the spread on interest-bearing businesses will be strengthened and the ratio of non- interest income will be increased. (b) The call loan position will be actively readjusted and the call loan position will be flexibly adjusted, in view of usable capital, to achieve optimal utilization. (c) The cash management business with loan customers will be strengthened and the ratio of customers’ demand deposits will be heightened. (d) Fee income will be increased. The TMU and foreign exchange business will existing customer segments will be reinforced, not only helping with the effective planning of customer assets and the efficiency of interest- and exchange-rate risk hedging but also increasing the Bank’s fee income. c. Continued integration and upgrading of the business platform The global e-banking network, foreign-exchange, cash management, and other systems will be reinforced so as to increase corporate banking customer loyalty, fee income, and the growth of demand deposits, thereby reducing capital costs and heightening internal operating efficiency and external customer satisfaction.

4. Personal and Mortgage Loan Business a. Ever since the Central Bank adopted targeted prudential measures, the Bank has implemented internal controls for certain areas with relatively large price increases, adjusting managers’ loan-to-value ratios. The Bank will adjust its loan policy whenever necessary in line with internal directions and real estate market conditions. b. In consideration of both capital adequacy and loan quality, the Bank will provide relatively preferential loan-to-value and interest rates to purchasers of residential property not for their own use. c. The management of old loan cases will be strengthened, with monthly assessment of the reasons for loan cancellations together with immediate response and reinforced management so as to avoid the loss of customers.

5. Trust Business The focus of the Bank’s trust business this year will be on giving equal attention to customer risk and income, with comprehensive planning to comply with customers’ asset allocation needs and effective reduction of customer’s

20 investment risk. In line with the business development goal of accelerated adjustment of the profit structure in 2014, the Bank will continue promoting advance payment trust, advance-purchase housing escrow trust, and existing housing escrow trust as the key areas of business so as to bring in low-cost deposits. In addition to the existing real estate trust and custodian service businesses, the Bank will continue promoting advance payment trust and real estate escrow trust in order to increase business volume. To provide customers with a low-risk and reliable trust platform, the Bank will constantly pursue the work of product development and planning, channel training, establishment of project operating procedures, back-office management operations and customer services, and providing explanations on law and taxation. Following are the strategies that we will pursue in our trust business this year: a. Real estate trust and advance payment trust businesses Proactive marketing, cross-marketing, and branch assisted marketing methods will be used to carry out civil construction financing in coordination with real estate trust, co-construction trust, presale housing contract bond trust, real estate transaction escrow trust, and gift-voucher advance payment trust in order to increase fee income, lower loan risk, boost branch deposits, and fulfill cross-marketing between financial holding company member firms. b. Custodianship business In addition to the already-operating Hong Kong Branch, the Bank is working to develop more overseas branches. The competent authority has opened up the development of financial businesses of a cross-strait nature, facilitating the Bank’s use of financial holding company resources in line with the establishment of overseas branches to continue promoting the custodianship business. c. Employee stock ownership trust business The financial holding company and other units are now engaging in the employee stock ownership trust business, and the Bank will use its previous experience in handling such trusts to further engage in this business with medium-sized and large corporate customers so as to expand the scale of its employee stock ownership trust business.

6. International Banking Business a. Strengthened absorption of foreign-currency deposits so as to expand the scale of the loan and investment businesses The Bank will lower capital costs and expand the scale of its business by vigorously pursuing foreign-currency deposits from customers and striving to expand the export business as well as reinforce e-banking functions. b. Cultivation of the Asia-Pacific market and vigorous expansion of overseas business locations Following the opening of the Hong Kong Branch in May 2011, the Bank continued developing overseas locations and in June 2013 received permission from the Financial Supervisory Commission to apply to the State Bank of Vietnam to establish a Binh Duong Branch. In view of the potential for economic development in Myanmar, the Bank received permission from the Financial Supervisory Commission in Dec. 2013 to set up a representative office in Yangon; planning is also under way to apply for establishment of a branch in Cambodia, in order to cultivate ASEAN countries where Taiwanese businesses are concentrated and provide the finest in financial services to them. The Bank also plans to accelerate its deployment in China following passage of the cross-strait agreement on trade in services in order to expand its financial territory.

7. Credit Card Business In its credit card business this year, the Bank’s emphasis will be on the continuous expansion of card issuance as well as the vigorous upgrading of consumption using SKB-issued cards and the ratio of valid cards. a. Volume of credit card issuance:

21 Co-branded cards will be issued in cooperation with the Shin Kong Mitsukoshi Department Stores, and the resources of the Shin Kong Financial Holding Group and its affiliated enterprises will be used together with Shin Kong Mitsukoshi’s special offers to attract card applications from customer groups in northern, central, and southern Taiwan. The Bank will also continue providing special offers to encourage consumption using the credit cards in order to cultivate existing customers and develop new customer groups. b. Valid card ratio: Different kinds of activities will be planned out in accordance with the length of time for which customers have ceased using the Bank’s credit cards, incentive programs for card use will be increased, and high-value customers will be developed with the aim of increasing the ratio of valid cards. c. Amount of consumption using credit cards: The Credit Card Department will work to strengthen customers’ willingness to use their cards and will strive continuously to develop high-quality customer groups, and, together with co-branded cards, will constantly introduce incentive activities focused on daily life and will coordinate with seasonal department store programs to offer a diverse array of gifts for consumption reaching certain amounts in order to attract customers to use their cards for consumption and increase the amount of such consumption.

8. Deposit and Remittances Business a. To reduce the cost of operating capital, the scale of demand deposits will be vigorously expanded via the following methods: provision of comprehensive funds-flow services to customers through cash management products, active promotion of the corporate banking business and strengthened upgrading of demand deposit performance, and increased cooperation with securities companies in the development of the demand deposit business in order to expand net interest spread income. b. The Bank will cooperate interactively with other members of the financial holding company to realize the synergies of integrated marketing and provide a more complete range of financial services in order to upgrade financial operating performance and expand the scale of the deposit business.

22 INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholder Taiwan Shin Kong Commercial Bank Co., Ltd.

We have audited the accompanying consolidated balance sheets of Taiwan Shin Kong Commercial Bank Co., Ltd. and its subsidiaries (the “Bank”) as of December 31, 2013, December 31, 2012 and January 1, 2012, and the related consolidated statements of comprehensive income, changes in equity, and cash flows for the years ended December 31, 2013 and 2012. These consolidated financial statements are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Bank as of December 31, 2013, December 31, 2012 and January 1, 2012, and their consolidated financial performance and their consolidated cash flows for the years ended December 31, 2013 and 2012, in conformity with the Guidelines Governing the Preparation of Financial Reports by Public Banks, International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), IFRIC Interpretations (IFRIC), and SIC Interpretations (SIC) endorsed by the Financial Supervisory Commission of the Republic of China.

March 5, 2014 Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, financial performance and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such consolidated financial statements are those generally applied in the Republic of China.

For the convenience of readers, the auditors’ report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language auditors’ report and consolidated financial statements shall prevail.

- 1 -

23 TAIWAN SHIN KONG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (In Thousands of New Taiwan Dollars)

December 31, 2013 December 31, 2012 January 1, 2012 ASSETS Amount % Amount % Amount %

CASH AND CASH EQUIVALENTS (Note 6) $ 23,140,511 3 $ 16,525,167 3 $ 10,320,038 2

DUE FROM CENTRAL BANK OF CHINA AND BANKS (Note 7) 120,850,612 17 129,336,837 20 110,495,816 20

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (Notes 4, 8 and 30) 19,512,146 3 3,479,449 1 5,198,999 1

RECEIVABLES, NET (Notes 4, 9, 10 and 30) 18,161,708 3 16,204,254 3 20,874,582 4

INCOME TAX ASSETS, CURRENT (Note 27) - - 383,609 - 1,148,551 -

NOTES DISCOUNTED AND LOANS, NET (Notes 4, 10 and 30) 444,641,614 64 421,358,813 66 371,035,016 66

AVAILABLE-FOR-SALE FINANCIAL ASSETS (Notes 4 and 11) 38,968,490 6 28,166,681 4 24,245,051 4

HELD-TO-MATURITY INVESTMENTS, NET (Notes 4, 12 and 31) 10,622,757 2 3,473,329 1 3,513,154 1

OTHER FINANCIAL ASSETS, NET (Notes 4, 10 and 13) 5,787,462 1 4,406,910 1 4,301,570 1

PROPERTIES AND EQUIPMENTS, NET (Notes 4 and 14) 6,914,949 1 7,046,575 1 7,080,183 1

GOODWILL AND INTANGIBLE ASSETS, NET (Notes 4 and 15) 1,502,834 - 1,419,462 - 1,349,401 -

DEFERRED INCOME TAX ASSETS (Notes 4 and 27) 919,410 - 1,174,158 - 765,919 -

OTHER ASSETS, NET (Notes 4, 16 and 30) 2,221,463 - 839,620 - 1,124,353 -

TOTAL $ 693,243,956 100 $ 633,814,864 100 $ 561,452,633 100

LIABILITIES AND EQUITY

LIABILITIES Due to Central Bank of China and banks (Note 17) $ 4,152,993 1 $ 3,221,695 - $ 7,842,865 1 Financial liabilities at fair value through profit or loss (Notes 4, 8 and 30) 3,464,639 1 1,245,021 - 2,274,883 - Notes issued under repurchase agreements (Notes 4 and 18) - - 3,731,418 1 3,823,256 1 Payables (Notes 4 and 19) 9,784,681 1 11,374,958 2 15,872,096 3 Income tax liabilities, current (Note 27) 264,515 - 14,620 - 16,752 - Customer deposits and remittances (Notes 20 and 30) 614,516,605 89 556,229,846 88 481,805,377 86 Financial debentures (Note 21) 18,500,000 3 23,800,000 4 19,800,000 4 Other financial liabilities (Notes 4 and 22) 3,364,380 - 912,976 - 1,269,906 - Provision (Notes 4 and 23) 606,139 - 436,456 - 363,001 - Deferred income tax liabilities (Note 27) 373,868 - 359,328 - 344,789 - Other liabilities (Notes 4 and 24) 1,586,432 - 927,597 - 705,264 -

Total liabilities 656,614,252 95 602,253,915 95 534,118,189 95

EQUITY (Note 25) Common stock 26,197,534 4 22,212,780 4 20,512,780 4 Capital surplus Premium on capital stock 865,379 - 365,754 - 365,754 - Other capital reserve 5,416 - - - - - Retained earnings Legal reserve 3,485,129 - 2,206,110 - 1,264,655 - Special reserve 60,508 - 60,508 - 60,508 - Unappropriated retained earnings 5,234,206 1 5,596,136 1 4,530,685 1 Other equity Exchange differences on translating foreign operations (2,613) - (9,596) - - - Unrealized gain from available-for-sale financial assets 784,145 - 1,129,257 - 600,062 -

Total equity 36,629,704 5 31,560,949 5 27,334,444 5

TOTAL $ 693,243,956 100 $ 633,814,864 100 $ 561,452,633 100

The accompanying notes are an integral part of the consolidated financial statements.

24

- 2 - TAIWAN SHIN KONG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Percentage For the Year Ended December 31 Increase 2013 2012 (Decrease) Amount % Amount % %

INTEREST INCOME (Notes 4, 26 and 30) $ 13,500,271 109 $ 12,393,228 106 9

INTEREST EXPENSE (Notes 26 and 30) (5,102,498) (41) (4,805,041) (41) 6

INTEREST REVENUE 8,397,773 68 7,588,187 65 11

NET INCOME (LOSS) EXCLUDING INTEREST REVENUE Service fees, net (Notes 4, 26 and 30) 2,716,489 22 2,439,006 21 11 Gain on financial assets and liabilities at fair value through profit or loss, net (Notes 4 and 26) 640,025 5 506,216 4 26 Realized gain on available-for-sale financial assets, net (Notes 4 and 26) 202,498 2 919,900 8 (78) Gain on foreign exchange, net 303,778 2 18,815 - 1,515 Gain on recovery of impairment loss (Notes 4 and 16) 37,301 - 228,026 2 (84) Other gains (loss) , net 142,848 1 (62,561) - 328

NET REVENUE 12,440,712 100 11,637,589 100 7

BAD DEBT EXPENSE (Notes 4 and 10) (1,166,894) (9) (700,860) (6) 66

OPERATING EXPENSES Employee welfare expenses (Notes 4 and 26) (3,642,137) (29) (3,459,034) (30) 5 Depreciation and amortization (Notes 4 and 26) (344,332) (3) (335,815) (3) 3 Business expenses and general and administrative expenses (Notes 26 and 30) (2,539,166) (21) (2,286,084) (19) 11

Total operating expenses (6,525,635) (53) (6,080,933) (52) 7

INCOME BEFORE INCOME TAX 4,748,183 38 4,855,796 42 (2)

INCOME TAX EXPENSE (Notes 4 and 27) (686,417) (5) (574,563) (5) 19

NET INCOME 4,061,766 33 4,281,233 37 (5) (Continued) 25

- 3 - TAIWAN SHIN KONG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In Thousands of New Taiwan Dollars, Except Earnings Per Share)

Percentage For the Year Ended December 31 Increase 2013 2012 (Decrease) Amount % Amount % %

OTHER COMPREHENSIVE INCOME Exchange differences on translating foreign operations $ 6,983 - $ (9,596) - 173 Unrealized (loss) gain on available-for-sale financial assets (345,112) (3) 529,195 5 (165) Actuarial gain and loss arising from defined benefit plans (192,574) (1) (89,551) (1) 115 Income tax relating to components of other comprehensive income 32,276 - 15,224 - 112

Other comprehensive income for the year, net of income tax (498,427) (4) 445,272 4 (212)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR $ 3,563,339 29 $ 4,726,505 41 (25)

NET INCOME ATTRIBUTABLE TO: Owner of the Company $ 4,061,766 33 $ 4,281,233 37 (5) Non-controlling interests - - - - -

$ 4,061,766 33 $ 4,281,233 37 (5)

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owner of the Company $ 3,563,339 29 $ 4,726,505 41 (25) Non-controlling interests - - - - -

$ 3,563,339 29 $ 4,726,505 41 (25)

EARNINGS PER SHARE (Note 28) Basic earnings per share $ 1.62 $ 1.73 Diluted earnings per share $ 1.62 $ 1.73

The accompanying notes are an integral part of the consolidated financial statements. (Concluded)

26

- 4 - ) ) - - - - 5,416 445,272 (500,000 (500,000 (498,427) 4,281,233 4,726,505 2,000,000 4,061,766 3,563,339 27,334,444 31,560,949 36,629,704 Total Equity $ $ ) ------for - 600,062 529,195 529,195 784,145 (345,112 (345,112) 1,129,257 Assets Gain on Gain Unrealized $ $ sale Financial Available ) ) ) ) ------Other Equity 6,983 6,983 (9,596 (9,596 (9,596 (2,613 Foreign Exchange Operations Translating $ $ Differences on Differences ) ) ) ) ) ) ) - - (74,327 (941,455 (500,000 (500,000 (160,298) 4,530,685 4,281,233 4,206,906 5,596,136 4,061,766 3,901,468 5,234,206 (1,700,000 (1,279,019 (2,484,379 Retained Earnings $ $ Unappropriated ------60,508 60,508 60,508 $ $ Special Reserve Special Retained Earnings Retained ------941,455 1,264,655 2,206,110 1,279,019 3,485,129 $ $ Legal Reserve Legal ty Attributable to Owners of the Company the of Owners to Attributable ty ------Equi ,416 5,416 5 -5- Option mployee Stock mployee $ $ E ------Capital Surplus 365,754 365,754 499,625 865,379 Premium on $ $ Capital Stock ------ND SUBSIDIARIES 1,700,000 2,484,379 1,500,375 20,512,780 22,212,780 26,197,534 $ $ Common Stock financial statements. financial d December 31, d December 31, d December onsolidated onsolidated ES IN EQUITY December 31, 2012 31, December earnings the year ended December 31, 2013 31, December ended the year based payment based - Legal reserve Legal Cash dividends dividends Stock reserve Legal Cash dividends dividends Stock 2012, net of income tax income of 2012, net 2012 tax income of 2013, net 2013 TAIWAN SHIN KONG COMMERCIAL BANK CO., LTD. A CONSOLIDATED STATEMENTS OF CHANG (In Taiwan New of Thousands Dollars) BALANCE, JANUARY 1, 2012 earnings 2011 of Appropriations ended the year for income Net ende year the for (loss) income comprehensive Other December 31, d ende year the for (loss) income comprehensive Total 31, 2012 DECEMBER BALANCE, 2012 of Appropriations cash for stock of common Issue for income Net ende year the for (loss) income comprehensive Other December 31, d ende year the for (loss) income comprehensive Total Share 31, 2013 DECEMBER BALANCE, c the of part notes an integral are The accompanying 27 TAIWAN SHIN KONG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars)

For the Year Ended December 31 2013 2012

CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax $ 4,748,183 $ 4,855,796 Adjustment for: Bad debt expense 1,166,894 700,860 Gain on financial assets and liabilities at fair value through profit or loss (640,025) (506,216) Interest expense 5,102,498 4,805,041 Interest income (13,500,271) (12,393,228) Dividend income (104,991) (707,843) Compensation cost of employee share options 5,416 - Gain on disposal of available-for-sale financial assets, net (97,507) (212,057) Depreciation expense 246,951 271,599 Amortizations expense 97,381 64,216 Loss on disposal of subsidiaries 729 - Loss on disposal of collateral assumed, net 11,719 135,132 Gain on market value increase of collateral assumed (37,301) (228,026) Gain on disposal of properties and equipments, net (16,037) (1,800) Net change in asset and liability accounts Due from Central Bank of China and banks (1,754,440) 921,185 Financial asset at fair value through profit or loss (14,303,064) 2,084,677 Receivables (1,399,166) 4,902,407 Notes discounted and loans (24,464,176) (51,056,954) Other assets 17,572 (35,353) Due to Central Bank of China and banks 931,298 (4,621,170) Financial liability at fair value through profit or loss 1,130,010 (888,773) Payables (1,399,068) (4,629,183) Deposits and remittances 58,286,759 74,424,469 Employee welfare provision (18,699) (1,771) Other liabilities 718,036 137,916 Cash generated from operations 14,728,701 18,020,924 Interest received 13,370,801 12,286,793 Dividend received 104,991 707,843 Interest paid (5,293,707) (4,672,996) Cash paid for income taxes - (205,453)

Net cash provided by operating activities 22,910,786 26,137,111

CASH FLOWS FROM INVESTING ACTIVITIES Purchase of available-for-sale financial assets (13,869,474) (5,159,879) Proceeds received on disposal of available-for-sale financial assets 2,578,536 1,953,747 Purchase of held-to-maturity financial assets (7,197,336) - Proceeds received on disposal of held-to-maturity investments - 8,400 Purchase of debt securities without active market (2,096,500) (5,127,208) Proceeds received on disposal of debt securities without active market 716,374 4,888,438 (Continued) 28

- 6 - TAIWAN SHIN KONG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands of New Taiwan Dollars)

For the Year Ended December 31 2013 2012

Net cash outflow on disposal of subsidiaries $ (610) $ - Increase in other financial assets (52,468) (24,934) Purchase of property and equipment (374,366) (294,843) Acquisition of intangible assets (75,826) (94,224) Acquisition of collateral assumed - (3) Proceeds received on disposal of property and equipment 171,008 17,933 Proceeds received on disposal of collateral assumed 25,582 95,400 (Increase) decrease in refundable deposits (1,396,167) 316,034

Net cash used in investing activities (21,571,247) (3,421,139)

CASH FLOWS FROM FINANCING ACTIVITIES Issuance of financial debenture - 4,000,000 Repayment of financial debenture (5,300,000) - Decrease in notes issued under repurchase agreement (3,731,418) (91,838) Increase (decrease) in other financial liabilities 2,451,404 (356,930) (Decrease) increase in guarantee deposits received (62,763) 86,865 Cash dividends distributed (500,000) (500,000) Proceeds from issue of common stock 2,000,000 -

Net cash (used in) provided by financing activities (5,142,777) 3,138,097

EFFECT OF EXCHANGE RATE CHANGES TO CASH AND CASH EQUIVALENTS 177,917 113,266

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (3,625,321) 25,967,335

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 131,853,392 105,886,057

CASH AND CASH EQUIVALENTS, END OF YEAR $ 128,228,071 $ 131,853,392

Reconciliation of the amounts in the consolidated statements of cash flows with the equivalent items reported in the consolidated balance sheets at December 31, 2013 and 2012:

December 31 2013 2012

Cash and cash equivalents in consolidated balance sheets $ 23,140,511 $ 16,525,167 Due from Central Bank of China and banks under IAS 7 105,087,560 115,328,225 Cash and cash equivalents in consolidated statements of cash flows $ 128,228,071 $ 131,853,392

The accompanying notes are an integral part of the consolidated financial statements. (Concluded)

29

- 7 - TAIWAN SHIN KONG COMMERCIAL BANK CO., LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 (In Thousands of New Taiwan Dollars, Unless Stated Otherwise)

1. ORGANIZATION AND OPERATIONS

On September 23, 1996, the Third Credit Cooperative of Taipei, a credit union, was approved by the Republic of China (“ROC”) Ministry of Finance (MOF) under Letter Tai-Tsai-Rong No. 85546025 to reorganize into a commercial bank named Macoto Bank.

Macoto Bank acquired all of the assets and assumed all of the liabilities of the Second Credit Cooperative of Hsinchu, the Eighth Credit Cooperative of Taichung, the Second Credit Cooperative of Chiayi, and the Credit Cooperative of Gang Shang (credit unions) on January 5, 1997, January 1, 1998, August 31, 2001, and September 14, 2001, respectively. The acquisitions were approved by the ROC MOF.

Responding to financial development trend and the government policy to promote financial institutions, Macoto Bank agreed to be acquired by Shin Kong Financial Holding Co., Ltd. by means of share swap in the stockholders’ meeting on June 10, 2005. The share swap was completed on October 3, 2005 and Macoto Bank became a wholly-owned subsidiary of Shin Kong Financial Holding Co., Ltd. On October 4, 2005, the board of directors resolved Macoto Bank’s merger with Taiwan Shin Kong Commercial Bank Co., Ltd. (“TSKCB”), a wholly-owned subsidiary of Shin Kong Financial Holding Co., Ltd., with Macoto Bank as the surviving entity and Taiwan Shin Kong Commercial Bank Co., Ltd. as the eliminated entity. Macoto Bank issued new shares to exchange TSKCB’s total assets and liabilities. For this share swap, Macoto Bank issued 708,727 thousand common shares at the share exchange ratio of 1.5040 common shares of TSKCB for every Macoto Bank share. On December 26, 2005, Macoto Bank obtained approval of the transaction from the Financial Supervisory Commission (FSC). On December 31, 2005, this transaction was completed. At the same time, Macoto Bank was renamed into Taiwan Shin Kong Commercial Bank Co., Ltd. (the “Bank” referred to in these financial statements).

As of December 31, 2013 and 2012, the Bank had 106 domestic branches including a business department, a trust department, a foreign exchange transaction department, a branch in Hong Kong, and an offshore banking branch in Taiwan. The Bank is engaged mainly in financial operations regulated by the Banking Law and others approved by competent authority. The Bank’s ultimate parent is Shin Kong Financial Holding Co., Ltd. (SKFHC).

The consolidated financial statements are presented in the Bank’s functional currency, New Taiwan dollars. For greater comparability and consistency of financial reporting, the consolidated financial statements are presented in New Taiwan dollars since the Bank is a public bank in Taiwan.

As of December 31, 2013 and 2012, there were 3,726 and 3,585 employees in the Bank, respectively.

2. APPROVAL OF FINANCIAL STATEMENTS

The consolidated financial statements were approved by the board of directors and authorized for issue on March 5, 2014.

30

- 8 - 3. APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS

a. New, amended and revised standards and interpretations (the “New IFRSs”) in issue but not yet effective

The Bank and entities controlled by the Bank (the “Group”) have not applied the following International Financial Reporting Standards (IFRS), International Accounting Standards (IAS), Interpretations of IFRS (IFRIC), and Interpretations of IAS (SIC) issued by the IASB. On January 28, 2014, the FSC announced the framework for the adoption of updated IFRSs version in the ROC. Under this framework, starting January 1, 2015, the previous version of IFRSs endorsed by the FSC (the 2010 IFRSs version) currently applied by companies with shares listed on the Taiwan Stock Exchange or traded on the Taiwan GreTai Securities Market or Emerging Stock Market will be replaced by the updated IFRSs without IFRS 9 (the 2013 IFRSs version). However, as of the date that the consolidated financial statements were authorized for issue, the FSC has not endorsed the following new, amended and revised standards and interpretations issued by the IASB (the “New IFRSs”) included in the 2013 IFRSs version. Furthermore, the FSC has not announced the effective date for the following New IFRSs that are not included in the 2013 IFRSs version.

The New IFRSs Included in the Effective Date 2013 IFRSs Version Not Yet Endorsed by the FSC Announced by IASB (Note 1)

Improvements to IFRSs (2009) - amendment to IAS 39 January 1, 2009 and January 1, 2010, as appropriate Amendment to IAS 39 “Embedded Derivatives” Effective for annual periods ending on or after June 30, 2009 Improvements to IFRSs (2010) July 1, 2010 and January 1, 2011, as appropriate Annual Improvements to IFRSs 2009-2011 Cycle January 1, 2013 Amendment to IFRS 1 “Limited Exemption from Comparative IFRS 7 July 1, 2010 Disclosures for First-time Adopters” Amendment to IFRS 1 “Severe Hyperinflation and Removal of Fixed July 1, 2011 Dates for First-time Adopters” Amendment to IFRS 1 “Government Loans” January 1, 2013 Amendment to IFRS 7 “Disclosure - Offsetting Financial Assets and January 1, 2013 Financial Liabilities” Amendment to IFRS 7 “Disclosure - Transfer of Financial Assets” July 1, 2011 IFRS 10 “Consolidated Financial Statements” January 1, 2013 IFRS 11 “Joint Arrangements” January 1, 2013 IFRS 12 “Disclosure of Interests in Other Entities” January 1, 2013 Amendments to IFRS 10, IFRS 11 and IFRS 12 “Consolidated January 1, 2013 Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance” Amendments to IFRS 10 and IFRS 12 and IAS 27 “Investment January 1, 2014 Entities” IFRS 13 “Fair Value Measurement” January 1, 2013 Amendment to IAS 1 “Presentation of Other Comprehensive Income” July 1, 2012 Amendment to IAS 12 “Deferred Tax: Recovery of Underlying January 1, 2012 Assets” IAS 19 (Revised 2011) “Employee Benefits” January 1, 2013 IAS 27 (Revised 2011) “Separate Financial Statements” January 1, 2013 IAS 28 (Revised 2011) “Investments in Associates and Joint January 1, 2013 Ventures” Amendment to IAS 32 “Offsetting Financial Assets and Financial January 1, 2014 Liabilities” IFRIC 20 “Stripping Costs in Production Phase of a Surface Mine” January 1, 2013 31

- 9 - Effective Date The New IFRSs Not Included in the 2013 IFRSs Version Announced by IASB (Note 1)

Annual Improvements to IFRSs 2010-2012 Cycle July 1, 2014 (Note 2) Annual Improvements to IFRSs 2011-2013 Cycle July 1, 2014 IFRS 9 “Financial Instruments” Effective date not determined Amendments to IFRS 9 and IFRS 7 “Mandatory Effective Date of Effective date not determined IFRS 9 and Transition Disclosures” IFRS 14 “Regulatory Deferral Accounts” January 1, 2016 Amendment to IAS 19 “Defined Benefit Plans: Employee July 1, 2014 Contributions” Amendment to IAS 36 “Impairment of Assets: Recoverable Amount January 1, 2014 Disclosures for Non-financial Assets” Amendment to IAS 39 “Novation of Derivatives and Continuation of January 1, 2014 Hedge Accounting” IFRIC 21 “Levies” January 1, 2014

Note 1: Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after the respective effective dates.

Note 2: The amendment to IFRS 2 applies to share-based payment transactions for which the grant date is on or after July 1, 2014; the amendment to IFRS 3 applies to business combinations for which the acquisition date is on or after July 1, 2014; the amendment to IFRS 13 is effective immediately; the remaining amendments are effective for annual periods beginning on or after July 1, 2014.

b. Significant impending changes in accounting policy resulted from New IFRSs in issue but not yet effective

Except for the following, the initial application of the above New IFRSs has not had any material impact on the Bank’s accounting policies:

Ɣ IFRS 9 “Financial Instruments”

Recognition and measurement of financial assets

With regards to financial assets, all recognized financial assets that are within the scope of IAS 39 “Financial Instruments: Recognition and Measurement” are subsequently measured at amortized cost or fair value. Specifically, financial assets that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost at the end of subsequent accounting periods. All other financial assets are measured at their fair values at the end of reporting period. However, the Bank may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognized in profit or loss.

As for financial liabilities, the main changes are with regard to the classification and measurement of financial liabilities designated as at fair value through profit or loss. IFRS 9 requires that the amount of change in the fair value of the financial liability, that is attributable to changes in the credit risk of that liability, is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss.

32

- 10 - c. Material impact on consolidated financial statements resulted from new and revised standards, amendments and interpretations in issue but not yet effective

The Bank is in the process of evaluating the impact of the initial application of the above-mentioned Standards, amendments and interpretations on its financial position and results of operations, and disclose the impact upon the completion of evaluation.

4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Statement of Compliance

The consolidated financial statements have been prepared in accordance with the Guidelines Governing the Preparation of Financial Reports by Public Banks and IFRSs as endorsed by the FSC.

Basis of Preparation

The consolidated financial statements have been prepared on the historical cost basis except for financial instruments that are measured at fair values. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

The opening consolidated balance sheets as of the date of transition to IFRSs were prepared in accordance with IFRS 1 “First-time Adoption of International Financial Reporting Standards”. The applicable IFRSs have been applied retrospectively by the Bank except for some aspects where IFRS 1 prohibits retrospective application or grants optional exemptions to this general principle. For the exemptions that the Bank elected, refer to Note 42.

Classification of Current and Non-current Assets and Liabilities

Accounts included in the Bank’s financial statements are not classified as current or non-current but are stated in the order of their liquidity. Please see Note 33 for the maturity analysis of assets and liabilities.

Basis of Consolidation

a. Principles for preparing consolidated financial statements

The consolidated financial statements incorporate the financial statements of the Bank and the entities controlled by the Bank (i.e. its subsidiaries, including special purpose entities).

When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by the Bank.

All intra-group transactions, balances, income and expenses are eliminated in full upon consolidation.

b. Subsidiaries included in consolidated financial statements

Those subsidiaries included in the consolidated entities as of December 31, 2013, December 31, 2012 and January 1, 2012 were as follows:

% of Ownership December 31, December 31, January 1, Investor Investee Main Businesses 2013 2012 2012

The Bank Shin Kong Marketing Consultant Co., Ltd. Marketing and consultant 100 100 100 Shin Kong Insurance Agency Co., Ltd. Life insurance agency 100 100 100 Shin Kong Property Insurance Agency Co., Ltd. Property insurance - 100 100 agency 33

- 11 - The Bank sold all stocks of Shin Kong Property Insurance Agency Co., Ltd. to SKFHC, the parent company of the Bank as of September 30, 2013.

Foreign Currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the entity’s functional currency are recognized at the rates of exchange prevailing at the dates of the transactions.

At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date.

Non-monetary items measured at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Exchange differences arising on the retranslation of non-monetary items are included in profit or loss for the period except for exchange differences arising from the retranslation of non-monetary items in respect of which gains and losses are recognized directly in other comprehensive income, in which case, the exchange differences are also recognized directly in other comprehensive income.

Non-monetary items that are measured at historical cost in a foreign currency are not retranslated.

For the purposes of presenting consolidated financial statements, the assets and liabilities of the Bank’s foreign operations are translated into New Taiwan dollars using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising are recognized in other comprehensive income.

Bonds Purchased under Resell/Notes Issued under Repurchase Agreements

A bond purchased under resell/a note issued under repurchase agreements is considered as a financing transaction if the risk and reward are attributed to the dealer. When a bond is purchased under a resell agreement, its purchase price is listed as “bonds purchased under resell agreements,” an asset account. For a note issued under repurchase agreement, the selling price is listed as “notes issued under repurchase agreements,” a liability account. The difference between purchase (sale) price under the agreement and actual sale (purchase) price is recorded as interest income (expense).

Financial Instruments

Financial assets and financial liabilities are recognized when a group entity becomes a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

Financial assets

All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace.

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- 12 - a. Measurement category

Financial assets are classified into the following specified categories: Financial assets at fair value through profit or loss, held-to-maturity investments, available-for-sale financial assets and loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. The categories of financial assets held by the Bank are financial assets at fair value through profit or loss, held-to-maturity investment, available-for-sale financial assets and loans and receivables.

1) Financial assets at fair value through profit or loss

Financial assets are classified as at fair value through profit or loss when the financial asset is either held for trading or it is designated as at fair value through profit or loss.

A financial asset is classified as held for trading if:

a) It has been acquired principally for the purpose of selling it in the near term; or

b) On initial recognition it is part of a portfolio of identified financial instruments that a company manages together and has a recent actual pattern of short-term profit-taking; or

c) It is a derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held for trading may be designated as at fair value through profit or loss upon initial recognition when doing so results in more relevant information and if:

a) Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

b) The financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Bank’s documented risk management or investment strategy, and information about the Banking is provided internally on that basis.

In addition, if a contract contains one or more embedded derivatives, the entire combined contract (asset or liability) can be designated as at fair value through profit or loss.

Financial assets at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any dividend or interest earned on the financial asset and is included in the other gains and losses line item. Fair value is determined in the manner described in Note 33.

2) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated as available-for-sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss.

Fair value is determined in the manner described in Note 33.

35

- 13 - Changes in the carrying amount of available-for-sale monetary financial assets relating to changes in foreign currency exchange rates, interest income calculated using the effective interest method and dividends on available-for-sale equity investments are recognized in profit or loss. Other changes in the carrying amount of available-for-sale financial assets are recognized in other comprehensive income and accumulated under the heading of investments revaluation reserve. When the investment is disposed of or is determined to be impaired, the cumulative gain or loss that was previously accumulated in the investments revaluation reserve is reclassified to profit or loss.

Dividends on available-for-sale equity instruments are recognized in profit or loss when the Bank’s right to receive the dividends is established.

Available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost less any identified impairment loss at the end of each reporting period and are recognized in a separate line item as financial assets carried at cost. If, in a subsequent period, the fair value of the financial assets can be reliably measured, the financial assets are remeasured at fair value. The difference between carrying amount and fair value is recognized in other comprehensive income on financial assets.

3) Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the Bank has the positive intent and ability to hold to maturity other than those that the entity upon initial recognition designates as at fair value through profit or loss, or designates as available for sale, or meet the definition of loans and receivables.

Subsequent to initial recognition, held-to-maturity investments are measured at amortized cost using the effective interest method less any impairment.

4) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables (including receivables, loans, delinquent loans and debt investments with no active market) are measured at amortized cost using the effective interest method, less any impairment, except for interest of short-term receivables.

b. Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected.

Objective evidence that a financial asset or group of assets is impaired includes observable data that comes to the attention of the holder of the asset about the following loss events:

1) Significant financial difficulty of the issuer or obligor;

2) A breach of contract, such as a default or delinquency in interest or principal payments;

3) The lender, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider;

4) The disappearance of an active market for that financial asset because of financial difficulties; or

36

- 14 - According to the Regulations, the Bank determines the allowance for credit losses by evaluating the recoverability of the outstanding balances of various loans at the balance sheet date. The allowances for doubtful accounts are determined based on management’s evaluation of the collectability of individual accounts, the borrowers’/clients’ financial condition and payment history. Such doubtful accounts are classified into: Normal loans, need attention, less likely to be collectible in full, difficult to collect, and uncollectible accounts and the allowance should be provided at 0.5%, 2%, 10%, 50%, and 100%, respectively, of the loan amount to meet the minimum requirement. Under the ruling reference No. 10010006830 issued by the Banking Bureau of the FSC, additional allowance for doubtful accounts should be provided at 1% of the total loans.

If there is objective evidence that an impairment loss on financial assets carried at amortized cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate.

For financial assets measured at amortized cost, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

When an available-for-sale financial asset is considered to be impaired, cumulative gains or losses previously recognized in other comprehensive income are reclassified to profit or loss in the period.

In respect of available-for-sale equity securities, impairment loss previously recognized in profit or loss are not reversed through profit or loss. Any increase in fair value subsequent to an impairment loss is recognized in other comprehensive income and accumulated under the heading of investments revaluation reserve. In respect of available-for-sale debt securities, impairment loss are subsequently reversed through profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss.

For financial assets carried at cost, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment loss will not be reversed in subsequent periods.

The carrying amount of accounts receivable is reduced through the use of an allowance account. When accounts receivable are considered uncollectible, they are written off against the allowance account. Recoveries of amounts previously written off are credited to the allowance account. Changes in the carrying amount of the allowance account are recognized as profit or loss. c. Derecognition of financial assets

The Bank derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another party.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss.

37

- 15 - Financial liabilities

a. Subsequent measurement

Except the following situation, all the financial liabilities are measured at amortized cost using the effective interest method.

1) Financial liabilities at fair value through profit or loss

Financial liabilities are classified as at fair value through profit or loss when the financial liability is either held for trading or it is designated as at fair value through profit or loss.

A financial liability is classified as held for trading if:

a) It has been acquired principally for the purpose of repurchasing it in the near term; or

b) On initial recognition it is part of a portfolio of identified financial instruments that the Bank manages together and has a recent actual pattern of short-term profit-taking; or

c) It is a derivative that is not designated and effective as a hedging instrument.

A financial liability other than a financial liability held for trading may be designated as at fair value through profit or loss upon initial recognition when doing so results in more relevant information and if:

a) Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

b) The financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Bank’s documented risk management or investment strategy, and information about the Banking is provided internally on that basis.

In addition, if a contract contains one or more embedded derivatives, the entire combined contract (asset or liability) can be designated as at fair value through profit or loss.

Financial liabilities at fair value through profit or loss are stated at fair value, with any gains or losses arising on remeasurement recognized in profit or loss. The net gain or loss recognized in profit or loss incorporates any interest paid on the financial liability and is included in the other gains and losses line item. Fair value is determined in the manner described in Note 33.

2) Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.

Financial guarantee contracts issued by the Bank are initially measured at their fair values and, if not designated as at fair value through profit or loss, are subsequently measured at the higher of the following and should be coped with based on the Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans:

a) The amount of the obligation under the contract, as determined in accordance with FSC-recognized IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”; and 38

- 16 - b) The amount initially recognized less, where appropriate, cumulative amortization recognized in accordance with FSC-recognized IAS 18 the revenue recognition policies. b. Derecognition of financial liabilities

The Bank derecognizes financial liabilities when, and only when, the Bank’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

Derivative financial instruments

Derivatives are initially recognized at fair value at the date the derivative contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. When the fair value of derivative financial instruments is positive, the derivative is recognized as a financial asset; when the fair value of derivative financial instruments is negative, the derivative is recognized as a financial liability.

Derivatives embedded in non-derivative host contracts are recognized as host contracts and embedded derivative instruments, respectively, when they meet the definition of a derivative, their risks and characteristics are not closely related to those of the host contracts and the contracts are not measured at fair value through profit or loss, unless the hybrid contracts are designated as assets or liabilities at fair value through profit or loss.

Property and Equipment

Property and equipment are stated at cost, less subsequent accumulated depreciation and subsequent accumulated impairment loss. Cost is capitalized when it is probable that future economic benefits associated with the item will flow to the Bank and the cost of the item can be measured reliably.

Freehold land is not depreciated.

Depreciation is recognized so as to write off the cost of the assets less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis in accordance with FSC-recognized IAS 8 “Accounting Policies, Changes in Accounting Estimates and Errors”.

An item of property and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.

Goodwill

For the purpose of impairment testing, goodwill is allocated to each of the Bank’s cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.

A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods. 39

- 17 - If goodwill has been allocated to a cash-generating unit and the entity disposes of an operation within that unit, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal, and is measured on the basis of the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Intangible Assets

a. Intangible assets acquired separately

Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently measured at cost less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-line basis over their estimated useful lives. The estimated useful life, residual value, and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. The residual value of an intangible asset with a finite useful life shall be assumed to be zero unless the Bank expects to dispose of the intangible asset before the end of its economic life.

b. Derecognition of intangible assets

An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gain or loss on the derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, is recognized in profit or loss.

Impairment of Tangible and Intangible Assets (Except Goodwill)

At the end of each reporting period, the Bank reviews the carrying amounts of its tangible and intangible assets, excluding goodwill, to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Bank estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to the individual cash-generating units; otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount.

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount.

When an impairment loss subsequently is reversed, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized immediately in profit or loss.

Provisions, Contingent Liabilities and Contingent Assets

A provision shall be recognized when:

a. An entity has a present obligation (legal or constructive) as a result of a past event;

40

- 18 - b. It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and c. A reliable estimate can be made of the amount of the obligation.

Provisions are measured at the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material).

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

Income Recognition a. Interest income

Interest income from a financial asset is recognized when it is probable that the economic benefits will flow to the Bank and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable. b. Service fee and commissions income

Service revenue and real estate management service revenue are recognized at once after providing loans or other services. If the service revenue belongs to several significant items, it is recognized when the significant items accomplished, such as the service revenue which the lead arranger bank of syndication loan received. If the service revenue is for further loan service and of significant amount, it is allocated during the period of the service or included in the base of calculation the effective interest rate of loans and receivables.

Leasing

Leases are classified as finance leases and operating leases.

Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Contingent rents arising under operating leases are recognized as income in the period in which they are realized.

Retirement Benefit Costs

Payments to defined contribution retirement benefit plans are recognized as an expense when employees have rendered service entitling them to the contributions.

For defined benefit retirement benefit plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at the end of each reporting period. Actuarial gains and losses on the defined benefit obligation are recognized immediately in other comprehensive income. Past service cost is recognized immediately to the extent that the benefits are already vested, and otherwise is amortized on a straight-line basis over the average period until the benefits become vested.

The retirement benefit obligation recognized in the consolidated balance sheets represents the present value of the defined benefit obligation as adjusted for unrecognized past service cost, and as reduced by the fair value of plan assets. Any asset resulting from this calculation is limited to the unrecognized past service cost, plus the present value of available refunds and reductions in future contributions to the plan. 41

- 19 - Curtailment or settlement gains or losses on the defined benefit plan are recognized when the curtailment or settlement occurs.

Employee Share Options

Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date.

The fair value determined at the grant date of the employee share options is expensed on a straight-line basis over the vesting period, based on the Bank’s estimate of employee share options that will eventually vest, with a corresponding increase in capital surplus - employee share options. The fair value determined at the grant date of the employee share options is recognized as an expense in full at the grant date when the share options granted vest immediately.

Taxation

a. Current tax

According to the Income Tax Law, an additional tax at 10% of unappropriated earnings is provided for as income tax in the year the shareholders approve to retain the earnings.

Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.

b. Deferred tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax assets are generally recognized for all deductible temporary differences, unused loss carryforward, research and development expenditures, and personnel training expenditures to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries, and interests in joint ventures, except where the Bank is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognized to the extent that it is probable that there will be sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. A previously unrecognized deferred tax asset is also reviewed at the end of each reporting period and recognized to the to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Bank expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and

42 liabilities.

- 20 - c. Current and deferred tax for the period

Current tax and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current tax and deferred tax are also recognized in other comprehensive income or directly in equity, respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

5. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Bank's accounting policies, management is required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

a. Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which the goodwill has been allocated. The calculation of value in use requires management to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. Where the actual future cash flows are less than expected, a material impairment loss may arise.

b. Income taxes

The realizability of the deferred tax asset mainly depends on whether sufficient future profits or taxable temporary differences will be available in the future. In cases where the actual future profits generated are less than expected, a material reversal of deferred tax assets may arise, which would be recognized in profit or loss for the period in which such reversal takes place.

c. Impairment of loans and receivables

Occurrence of objective evidence of impairment loss on loans will impact the assumptions on cash flows. The amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit loss that had not yet happened) discounted at its original effective interest rate. Where the actual future cash flows are less than expected, a material impairment loss may arise.

d. Fair value of derivative and other financial instruments

Fair value of financial instruments with no quoted prices in an active market is determined by valuation. Fair value is valued by observable market prices. If there are no observable market prices, fair value is estimated by appropriate assumption. When fair value is determined by estimation models, all models are ought to be corrected to ensure results are according with actual market price.

43

- 21 - 6. CASH AND CASH EQUIVALENTS

December 31, December 31, 2013 2012 January 1, 2012

Cash $ 4,897,453 $ 4,468,864 $ 3,847,828 Notes and checks for clearing 1,720,072 4,403,718 3,672,680 Deposits in other banks 16,522,986 7,652,585 2,799,530

$ 23,140,511 $ 16,525,167 $ 10,320,038

Cash and cash equivalents as of December 31, 2013, December 31, 2012 and January 1, 2012 as shown in the consolidated statement of cash flows can be reconciled to the related items in the consolidated balance sheets as follows:

December 31, December 31, 2013 2012 January 1, 2012

Cash and cash equivalents in consolidated balance sheet $ 23,140,511 $ 16,525,167 $ 10,320,038 Due from Central Bank of China and banks under IAS 7 105,087,560 115,328,225 95,566,019

$ 128,228,071 $ 131,853,392 $ 105,886,057

7. DUE FROM THE CENTRAL BANK OF CHINA AND BANKS

December 31, December 31, 2013 2012 January 1, 2012

Reserve for deposits Reserve - checking account $ 29,681,197 $ 4,684,138 $ 10,106,496 Reserve - demand account 15,515,666 13,693,368 12,429,797 Inter-bank clearing account 600,032 800,739 605,352 Reserve - foreign currency deposit 89,850 72,840 60,580 Time deposits 73,400,000 78,200,000 78,800,000 Due from banks 1,563,867 31,885,752 8,493,591

$ 120,850,612 $ 129,336,837 $ 110,495,816

The monthly depositary reserves to be deposited in the Central Bank of the Republic of China are calculated by applying the legally required reserve ratio to the monthly average balance of the reserve accounts. These reserve accounts can be used at all time but the Demand account can only be used for monthly deposit reserve adjustments.

44

- 22 - 8. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

December 31, December 31, 2013 2012 January 1, 2012

Financial assets held for trading

Convertible corporate bonds $ 439,056 $ 687,764 $ 976,796 Exchangeable corporate bonds - - 108,470 Negotiable certificate of deposit 4,177,241 - - Commercial paper 10,074,274 - - Beneficiary certificates 25,816 290,224 582,707 Foreign exchange call options 1,352,174 292,142 222,784 Merchandise call options 1,527 14,612 33,702 Commodity price swap 7,707 - - Cross-currency swap contracts 1,150,593 971,284 1,043,653 Foreign exchange forward contracts 713,718 41,848 841,099 Interest rate swap 121,985 9,058 8,892 Exchange and interest rate swap 10,523 17,614 10,335 Non-delivery forwards contracts 7,174 5,175 - Equity swap contracts 186,210 45 -

$ 18,267,998 $ 2,329,766 $ 3,828,438

Financial asset designated at fair value through profit or loss

Asset swap-linked corporate bond $ 1,244,148 $ 1,149,683 $ 1,370,561

Financial liabilities held for trading

Foreign exchange put options $ 1,352,174 $ 292,142 $ 222,784 Merchandise put options 1,647 14,874 34,107 Commodity price swap 7,707 - - Cross-currency swap contracts 1,442,805 547,000 1,811,598 Foreign exchange forward contracts 334,478 359,689 187,167 Interest rate swap 121,985 9,058 8,892 Exchange and interest rate swap 10,523 17,614 10,335 Non-delivery forwards contracts 7,110 4,599 - Equity swap contracts 186,210 45 -

$ 3,464,639 $ 1,245,021 $ 2,274,883

As of December 31, 2013, December 31, 2012 and January 1, 2012, the Bank’s outstanding derivative contracts are summarized as follows:

Contract Amount (Notional Principals in Thousand Dollar) December 31, December 31, 2013 2012 January 1, 2012

Cross-currency swap contracts $ 150,951,452 $ 116,701,984 $ 118,466,613 Exchange option 280,815,568 48,895,427 23,033,276 Foreign exchange forward contracts 52,129,770 36,148,287 27,417,980 (Continued)

45

- 23 - Contract Amount (Notional Principals in Thousand Dollar) December 31, December 31, 2013 2012 January 1, 2012

Interest rate swap $ 2,999,122 $ 2,095,088 $ 3,605,984 Exchange and interest rate swap 1,233,680 1,253,958 536,133 Merchandise options 28,992 196,878 392,861 Non-delivery forwards contracts 488,509 824,380 - Commodity price swap 216,922 - - Credit default swap 1,839,377 11,522 - (Concluded)

The Bank is engaged in derivative financial instruments in order to accommodate customer demand, arrangement of foreign currencies and risk management.

9. RECEIVABLES, NET

December 31, December 31, 2013 2012 January 1, 2012

Accounts receivable $ 12,551,872 $ 11,817,515 $ 10,584,242 Foreign currency settlement receivable 2,773,150 1,953,990 7,755,167 Customers’ liabilities under acceptances 1,104,259 1,025,228 1,248,261 Interests receivable 1,241,707 982,499 818,885 Notes receivable 6,131 4,624 5,379 Other receivables 543,444 654,189 702,827 18,220,563 16,438,045 21,114,761 Less allowance for doubtful accounts (Note 10) (58,855) (233,791) (240,179)

$ 18,161,708 $ 16,204,254 $ 20,874,582

10. NOTES DISCOUNTED AND LOANS, NET

December 31, December 31, 2013 2012 January 1, 2012

Notes discounted and bill negotiated $ 3,386,060 $ 2,014,920 $ 1,351,128 Accounts receivable financing 238,209 156,215 489,470 Loans due within one year 103,642,872 100,803,058 88,915,972 Loans due from one to seven years 159,246,537 153,314,415 129,460,903 Loans due more than seven years 181,773,286 167,955,452 151,757,625 Delinquent loans 1,262,421 1,559,505 2,852,773 449,549,385 425,803,565 374,827,871 Discount 154,288 67,603 (42,478) Less allowance for doubtful accounts (5,062,059) (4,512,355) (3,750,377)

$ 444,641,614 $ 421,358,813 $ 371,035,016

As of December 31, 2013, December 31, 2012 and January 1, 2012, the delinquent loans on which interest ceased to accrue amounted to $1,262,421 thousand, $1,559,505 thousand and $2,852,773 thousand, respectively.

46

- 24 - As of December 31, 2013, December 31, 2012 and January 1, 2012, receivables, notes discounted and loans and other financial assets classified according to the credit risk characteristics of the products were as follows:

December 31, 2013 Receivables and Item Notes Discounted and Loans Other Financial Assets Total Allowance Total Allowance Individual assessment $ 4,244,017 $ 1,898,179 $ 71,835 $ 48,498 Objective evidence of individual of impairment impairment Collective assessment 1,408,481 713,484 155,500 104,289 of impairment Nonobjective evidence of Collective assessment 443,896,887 535,226 136,988,097 46,578 individual impairment of impairment Total 449,549,385 3,146,889 137,215,432 199,365

December 31, 2012 Receivables and Item Notes Discounted and Loans Other Financial Assets Total Allowance Total Allowance Individual assessment $ 4,472,496 $ 2,148,270 $ 20,961 $ 18,133 Objective evidence of individual of impairment impairment Collective assessment 1,458,080 700,337 157,510 81,554 of impairment Nonobjective evidence of Collective assessment 419,872,989 562,832 142,847,773 222,030 individual impairment of impairment Total 425,803,565 3,411,439 143,026,244 321,717

January 1, 2012 Receivables and Item Notes Discounted and Loans Other Financial Assets Total Allowance Total Allowance Individual assessment $ 3,911,630 $ 1,936,358 $ 23,268 $ 22,348 Objective evidence of individual of impairment impairment Collective assessment 834,885 240,695 93,272 68,026 of impairment Nonobjective evidence of Collective assessment 370,081,356 937,779 121,245,307 212,468 individual impairment of impairment Total 374,827,871 3,114,832 121,361,847 302,842

According to IAS 39, the amount of allowance for doubtful accounts was measured based on the credit risk characteristics of the accounts. The amount measured under IAS 39 as of December 31, 2013, December 31, 2012 and January 1, 2012 was less than the amount calculated under the rule No. 10010006830 issued by the Banking Bureau of FSC, which should be 1% higher than the ratio of allowance for notes discounted and loans recognized over total loans. As of December 31, 2013, December 31, 2012 and January 1, 2012, the bad debt expense are increased by $1,915,170 thousand, $1,100,916 thousand and $635,545 thousand, and allowance for doubtful accounts was $5,062,059 thousand, $4,512,355 thousand and $3,750,377 thousand, respectively.

As of December 31, 2013 and 2012, the total amount evaluated based on the credit risk characteristics of the accounts included due from Central Bank of China and banks, receivables, notes discounted and loans, and other financial assets.

47

- 25 - The details of and changes in allowance for credit losses of receivables, notes discounted and loans, and other financial assets are summarized below:

2013 Notes Receivables and Discounted and Other Financial Loans Assets Total

Balance, January 1, 2013 $ 4,512,355 $ 321,717 $ 4,834,072 Provision (reversion) 1,168,737 (1,843) 1,166,894 Write offs (1,062,262) (288,428) (1,350,690) Reversal of write offs 430,591 167,919 598,510 Exchange influence 12,638 - 12,638

Balance, December 31, 2013 $ 5,062,059 $ 199,365 $ 5,261,424

2012 Notes Receivables and Discounted and Other Financial Loans Assets Total

Balance, January 1, 2012 $ 3,750,377 $ 302,842 $ 4,053,219 Provision (reversion) 744,062 (43,202) 700,860 Write offs (637,840) (124,443) (762,283) Reversal of write offs 666,661 186,520 853,181 Exchange influence (10,905) - (10,905)

Balance, December 31, 2012 $ 4,512,355 $ 321,717 $ 4,834,072

11. AVAILABLE-FOR-SALE FINANCIAL ASSETS

December 31, December 31, 2013 2012 January 1, 2012

Government bonds $ 22,843,579 $ 17,161,602 $ 16,960,563 Foreign bonds 10,725,710 6,570,797 1,966,648 Corporate bonds 1,697,373 302,897 605,021 Real estate asset fund 2,016,123 1,847,801 2,595,837 Listed stocks 1,133,671 1,924,341 1,860,938 Listed stocks (overseas) 552,034 359,243 256,044

$ 38,968,490 $ 28,166,681 $ 24,245,051

The foreign bonds amount to foreign currencies are as below:

December 31, December 31, 2013 2012 January 1, 2012

USD $ 168,108 $ 139,830 $ 64,928 AUD 101,274 65,746 - CNY 194,517 35,717 - ZAR 706,599 98,980 -

48

- 26 - 12. HELD-TO-MATURITY INVESTMENTS

December 31, December 31, 2013 2012 January 1, 2012

Government bonds $ 7,530,567 $ 3,305,959 $ 3,350,030 Foreign bonds 2,620,957 - - Corporate bonds 299,619 - - Beneficiary certificates 171,614 167,370 163,124

$ 10,622,757 $ 3,473,329 $ 3,513,154

a. Held-to-maturity investments are pledged to district courts for litigation and for issuing financial debenture. Please refer to Note 31.

b. As of December 31, 2013, the foreign bonds amounted to US$77,606 thousand and RMB59,960 thousand, respectively.

13. OTHER FINANCIAL ASSETS, NET

December 31, December 31, 2013 2012 January 1, 2012

Debt securities without active market $ 5,342,436 $ 3,961,768 $ 3,856,099 Financial assets carried at cost 445,026 445,026 445,026 Remittance purchase - 116 445 Other delinquent loan, net - - -

$ 5,787,462 $ 4,406,910 $ 4,301,570

Details of the debt securities without active market are summarized as below:

December 31, December 31, 2013 2012 January 1, 2012

Foreign bonds $ 5,342,436 $ 3,961,768 $ 3,856,099

Debt securities without active market amounted to foreign currencies are as below:

December 31, December 31, 2013 2012 January 1, 2012

USD $ 165,000 $ 110,000 $ 107,000 AUD 15,000 25,000 20,000

Details of the financial assets carried at cost are summarized as below:

December 31, December 31, 2013 2012 January 1, 2012

Domestic non-listed preferred stock $ 300,000 $ 300,000 $ 300,000 Domestic non-listed common stock 145,026 145,026 145,026

$ 445,026 $ 445,026 $ 445,026 49

- 27 - Management believed that the fair value of the above unlisted equity investments held by the Group cannot be reliably measured due to the very wide range of reasonable fair value estimates; therefore, they were measured at cost less impairment at the end of reporting period.

Details of other delinquent loan - net are summarized as follows:

December 31, December 31, 2013 2012 January 1, 2012

Other delinquent loan $ 140,510 $ 87,926 $ 62,663 Less allowance for doubtful accounts (Note 10) (140,510) (87,926) (62,663)

$ - $ - $ -

14. PROPERTY AND EQUIPMENT

December 31, December 31, 2013 2012 January 1, 2012

Land $ 4,520,408 $ 4,643,120 $ 4,651,232 Building and structures 1,731,650 1,821,873 1,886,274 Computers 221,137 156,216 178,379 Transportation 2,102 3,374 4,102 Other equipment 312,989 273,245 267,844 Construction in process 126,663 148,747 92,352

$ 6,914,949 $ 7,046,575 $ 7,080,183

2013 Building and Other Construction Land Structures Computers Transportation Equipment in Progress Total

Cost

Balance, beginning of year $ 4,643,120 $ 2,749,674 $ 1,037,193 $ 8,081 $ 467,243 $ 148,747 $ 9,054,058 Addition - - 98,243 - 144,790 131,333 374,366 Reduction (122,712) (91,760) (92,547) - (88,961) - (395,980) Reclassifications - - 37,341 - (65,387) (153,418) (181,464) Translation adjustment - - 154 - 195 1 350 Balance, end of year 4,520,408 2,657,914 1,080,384 8,081 457,880 126,663 8,851,330

Accumulated depreciation

Balance, beginning of year - 927,801 880,977 4,707 193,998 - 2,007,483 Addition - 59,648 70,783 1,272 115,248 - 246,951 Reduction - (61,185) (92,537) - (87,287) - (241,009) Reclassifications - - - - (77,069) - (77,069) Exchange influence - - 24 - 1 - 25 Balance, end of year - 926,264 859,247 5,979 144,891 - 1,936,381

Balance, end of year, net $ 4,520,408 $ 1,731,650 $ 221,137 $ 2,102 $ 312,989 $ 126,663 $ 6,914,949

2012 Building and Other Construction Land Structures Computers Transportation Equipment in Progress Total

Cost

Balance, beginning of year $ 4,651,232 $ 2,754,645 $ 1,105,508 $ 7,484 $ 510,731 $ 92,352 $ 9,121,952 Addition 2,772 - 67,868 597 125,927 97,679 294,843 Reduction (10,884) (4,971) (136,183) - (92,581) - (244,619) Reclassifications - - - - (76,337) (41,284) (117,621) Exchange influence - - - - (497) - (497) Balance, end of year 4,643,120 2,749,674 1,037,193 8,081 467,243 148,747 9,054,058 (Continued)

50

- 28 - 2012 Building and Other Construction Land Structures Computers Transportation Equipment in Progress Total

Accumulated depreciation

Balance, beginning of year $ - $ 868,371 $ 927,129 $ 3,382 $ 242,887 $ - $ 2,041,769 Addition - 62,895 89,979 1,325 117,400 - 271,599 Reduction - (3,465) (136,131) - (88,890) - (228,486) Reclassifications - - - - (77,399) - (77,399) Translation adjustment ------Balance, end of year - 927,801 880,977 4,707 193,998 - 2,007,483

Balance, end of year, net $ 4,643,120 $ 1,821,873 $ 156,216 $ 3,374 $ 273,245 $ 148,747 $ 7,046,575 (Concluded)

The above items of property and equipment were depreciated on a straight-line basis over the following estimated useful lives:

Building and structures Buildings 40-55 years Decorating project 2-10 years Computers 2-5 years Transportations 2-5 years Other equipment 2-5 years

15. INTANGIBLE ASSETS

December 31, December 31, 2013 2012 January 1, 2012

Goodwill $ 1,243,924 $ 1,243,924 $ 1,243,924 Computer software 258,910 175,538 105,477

$ 1,502,834 $ 1,419,462 $ 1,349,401

The excess of purchase price (cash) over net asset was recognized as goodwill. As of December 31, 2013, no impairment loss should be charged.

Movements of computer software were as follows:

2013 2012

Balance, beginning of year $ 175,538 $ 105,477 Addition 75,826 94,224 Amortization (97,381) (64,216) Reclassifications 104,395 40,222 Translation adjustment 532 (169)

Balance, ending of year $ 258,910 $ 175,538

51

- 29 - 16. OTHER ASSETS

December 31, December 31, 2013 2012 January 1, 2012

Refundable deposits $ 2,136,014 $ 739,847 $ 1,055,881 Prepayments 85,449 99,773 65,969 Collateral assumed, net - - 2,503

$ 2,221,463 $ 839,620 $ 1,124,353

As of December 31, 2013, December 31, 2012 and January 1, 2012, collateral assumed consists of the following:

December 31, December 31, 2013 2012 January 1, 2012

Land $ 133,418 $ 148,400 $ 284,986 Buildings 10,135 32,454 126,397 Less allowance for collaterals assumed (143,553) (180,854) (408,880)

$ - $ - $ 2,503

17. DUE TO CENTRAL BANK OF CHINA AND BANKS

December 31, December 31, 2013 2012 January 1, 2012

Call loan from banks $ 3,570,458 $ 2,394,834 $ 6,890,975 Due to Chunghwa Post Co., Ltd. 535,802 749,625 769,744 Due to banks 46,733 77,236 182,146

$ 4,152,993 $ 3,221,695 $ 7,842,865

18. NOTES ISSUED UNDER REPURCHASE AGREEMENTS

December 31, December 31, 2013 2012 January 1, 2012

Foreign bonds $ - $ 1,229,962 $ 320,975 Government bonds - 2,501,456 3,502,281

$ - $ 3,731,418 $ 3,823,256

52

- 30 - The repurchase commitments and interest rates as of December 31, 2013, December 31, 2012 and January 1, 2012 are as below:

December 31, December 31, 2013 2012 January 1, 2012

Foreign bonds $ - $ 1,233,809 $ 321,456 Government bonds - 2,502,308 3,503,286

$ - $ 3,736,117 $ 3,824,742

Foreign bonds - 3.58% 0.90% Government bonds - 0.71%-0.75% 0.72%-0.77%

The foreign bonds amounted to foreign currencies are as below:

December 31, December 31, 2013 2012 January 1, 2012

USD $ - $ - $ 10,598 AUD - 40,630 -

19. PAYABLES

December 31, December 31, 2013 2012 January 1, 2012

Foreign currency settlement payable $ 2,774,041 $ 1,959,022 $ 7,754,052 Notes and checks in clearing 1,720,072 4,403,718 3,672,680 Bankers’ acceptances 1,103,694 1,009,115 1,242,987 Interest payable 701,820 893,029 760,984 Accrued expenses 1,391,870 1,270,103 1,161,709 Receipts under custody 225,829 378,462 306,058 Trust exchange payable 374,685 505,004 144,705 Accounts payable 1,008,758 462,548 345,913 Other payables 483,912 493,957 483,008

$ 9,784,681 $ 11,374,958 $ 15,872,096

20. CUSTOMER DEPOSITS AND REMITTANCES

December 31, December 31, 2013 2012 January 1, 2012

Savings account deposits $ 288,403,632 $ 285,275,528 $ 268,122,892 Time deposits 216,882,358 174,556,095 135,573,836 Demand deposits 98,940,859 85,846,910 69,218,350 Checking account deposits 6,454,282 7,332,562 6,816,643 Negotiable certificates of deposit 3,743,100 3,110,200 2,004,700 Remittances outstanding 92,374 108,551 68,956

$ 614,516,605 $ 556,229,846 $ 481,805,377

53

- 31 - 21. FINANCIAL DEBENTURE

December 31, December 31, 2013 2012 January 1, 2012

Secondary financial debenture $ 18,500,000 $ 23,800,000 $ 19,800,000

The Bank issued first secondary financial debenture and second secondary financial debenture on November 13, 2006 and November 27, 2006, respectively, which were approved under ruling reference No. 09500376520 issued by the Banking Bureau of the FSC on September 8, 2006. Details of the financial debenture issuance are summarized as follows:

a. Total approved principal: $8,800,000 thousand.

b. Principal issued: $8,800,000 thousand.

c. Denomination: $10,000 thousand, issued at par.

d. Period: Debenture I: 7 years with maturities on November 13, 2013 and November 27, 2013, respectively. Debenture II: 7 years with maturities on November 13, 2016 and November 27, 2016, respectively.

e. Nominal interest rate: Fixed interest rate.

f. Repayment: The financial debenture will be paid on the maturity date.

g. The interest will be paid annually from the issuance date.

The Bank issued first primary financial debenture on December 18, 2009, which was approved under ruling reference No. 09800314532 issued by the Banking Bureau of the FSC on July 10, 2009. Details of the financial debenture issuance are summarized as follows:

a. Total approved principal: $3,000,000 thousand.

b. Principal issued: $3,000,000 thousand.

c. Denomination: $10,000 thousand, issued at par.

d. Period: 7 years with maturities on December 18, 2016.

e. Nominal interest rate: Fixed interest rate.

f. Repayment: The financial debenture will be paid on the maturity date.

g. The interest will be paid annually from the issuance date.

The Bank issued first no due date non-cumulative secondary financial debenture on June 30, 2010, which was approved under ruling reference No. 09900171020 issued by the Banking Bureau of the FSC on May 14, 2010. Details of the financial debenture issuance are summarized as follows:

a. Total approved principal: $3,000,000 thousand.

b. Principal issued: $3,000,000 thousand.

c. Denomination: $10,000 thousand, issued at par. 54

- 32 - d. Period: No due date. e. Nominal interest rate: The rate from the grant date to the tenth anniversary year is fixed interest rate, 3.5%. If the Bank has not redeemed yet, the fixed interest rate will be readjusted to 4.5% effective on the next day of the tenth anniversary year from the grant date. f. Repayment: After the tenth anniversary year from the grant date, if the Bank’s capital adequacy ratio after redemption will meet the minimum requirement of the authorities and the authorities approve the application of the Bank, the Bank may redeem. Redemption is carried out in the stipulated denomination plus accrued interest payable. g. The interest will be paid annually from the issuance date.

The Bank issued first secondary financial debenture on March 30, 2011, which was approved under ruling reference No. 10000035830 issued by the Banking Bureau of the FSC on February 14, 2011. Details of the financial debenture issuance are summarized as follows: a. Total approved principal: $3,000,000 thousand. b. Principal issued: $3,000,000 thousand. c. Denomination: $10,000 thousand, issued at par. d. Period: Debenture I: 7 years with maturity on December 28, 2019. Debenture II: 10 years with maturity on December 28, 2022. e. Nominal interest rate: Fixed interest rate. f. Repayment: The financial debenture will be paid on the maturity date. g. The interest will be paid annually from the issuance date.

The Bank issued second secondary financial debenture on September 26, 2011, which was approved under ruling reference No. 10000301920 issued by the Banking Bureau of the FSC on September 2, 2011. Details of the financial debenture issuance are summarized as follows: a. Total approved principal: $2,000,000 thousand. b. Principal issued: $2,000,000 thousand. c. Denomination: $10,000 thousand, issued at par. d. Period: Debenture I: 10 years with maturities on September 26, 2021. Debenture II: 7 years with maturities on September 26, 2018. e. Nominal interest rate: Fixed interest rate. f. Repayment: The financial debenture will be paid on the maturity date. g. The interest will be paid annually from the issuance date.

The Bank issued first secondary financial debenture on December 21, 2012, which was approved under ruling reference No. 10100401120 issued by the Banking Bureau of the FSC on December 28, 2012. Details of the financial debenture issuance are summarized as follows: a. Total approved principal: $4,000,000 thousand. 55

- 33 - b. Principal issued: $4,000,000 thousand.

c. Denomination: $10,000 thousand, issued at par.

d. Period: Debenture I: 7 years with maturities on December 28, 2019. Debenture II: 10 years with maturities on December 28, 2022.

e. Nominal interest rate: Fixed interest rate.

f. Repayment: The financial debenture will be paid on the maturity date.

g. The interest will be paid annually from the issuance date.

22. MISCELLANEOUS FINANCIAL LIABILITIES

December 31, December 31, 2013 2012 January 1, 2012

Structured commodity principal $ 3,337,192 $ 866,399 $ 1,207,534 Appropriated loan fund 10,058 27,000 42,795 Lease payable 17,130 19,577 19,577

$ 3,364,380 $ 912,976 $ 1,269,906

As of December 31, 2013 and 2012, structured products are dual currency “U.S. dollar range benefit,” “U.S. dollar linked rate indicated structured product,” “ZAR range benefit,” “ZAR linked stock indicated structured product” and “CNY rate product” time deposits, which pay interest in accordance with the linked interest rate indicator in the contractual provisions.

As of December 31, 2013, December 31, 2012 and January 1, 2012, the Bank being one of the Banks that lend to the Taipei International Financial Building Co., Ltd. was provided by the government with a funding reported as appropriated loan fund in the amounts of $10,058 thousand, $27,000 thousand and $42,795 thousand, respectively.

In December 2004, the Bank entered into an automation equipment lease agreement with Taiwan Shin Kong Security Co., Ltd. Terms and conditions of the agreement are summarized as follows:

a. Subject: Automated teller machines (ATMs)

b. Term: Five years from the next day of inspection. Upon expiry, the ownership of these ATMs will be transferred to the Bank.

c. Lease payment: Monthly rental of $30 thousand each and was reduced to $26 thousand each in 2009.

d. During the lease term, the Bank is obliged to pay full rentals for any installed but later withdrawn ATM.

e. As of December 31, 2013, 434 ATMs had been installed. The ownership of all the machines have been transferred to the Bank; thus, they were reclassified to property and equipment - computers.

56

- 34 - 23. PROVISION

December 31, December 31, 2013 2012 January 1, 2012

Retirement benefit plans $ 591,907 $ 422,224 $ 348,769 Guarantee reserve 14,232 14,232 14,232

$ 606,139 $ 436,456 $ 363,001

Retirement Benefit Plans

a. Defined contribution plans

The pension plan under the Labor Pension Act (the “LPA”) is a defined contribution plan. Based on the LPA, the Bank make monthly contributions to employees’ individual pension accounts at 6% of monthly salaries and wages.

The Bank has recognized $115,946 thousand and $107,496 thousand as profit and loss according to defined contribution plans in 2013 and 2012.

b. Defined benefit plans

Based on the defined benefit plan under the Labor Standards Law (the “LSL”), pension benefits are calculated on the basis of the length of service and average monthly salaries of the six months before retirement. The Bank contributed amounts equal to 2% of total monthly salaries and wages to a pension fund administered by the pension fund monitoring committee. Pension contributions are deposited in Bank of Taiwan in the committee’s name.

The plan assets are invested in domestic (foreign) equity and debt securities, bank deposits, etc. The investment is conducted at the discretion of Bureau of Labor Funds, Ministry of Labor or under the mandated management. However, in accordance with Regulations for Revenues, Expenditures, Safeguard and Utilization of the Labor Retirement Fund the return generated by employees' pension contribution should not be below the interest rate for a 2-year time deposit with local banks.

The actuarial valuations of plan assets and the present value of the defined benefit obligation were carried out by qualifying actuaries. The principal assumptions used for the purposes of the actuarial valuations were as follows:

Expected Expected Discount Return on Rate(s) of Rate(s) Plan Assets Salary Increase

2013

Taiwan Shin Kong Commercial Bank 1.63% 2.00% 2.25% Shin Kong Marketing Consultant Co., Ltd. 1.63% 2.00% 2.00% Shin Kong Insurance Agency Co., Ltd. 1.88% 2.00% 3.25%

2012

Taiwan Shin Kong Commercial Bank 1.75% 1.88% 2.25% Shin Kong Marketing Consultant Co., Ltd. 1.38% 1.88% 2.00% Shin Kong Insurance Agency Co., Ltd. 1.63% 1.88% 3.25% 57

- 35 - The assessment of the overall expected rate of return was based on historical return trends and analysts’ predictions of the market for the asset over the life of the related obligation, by reference to the aforementioned use of the plan assets and the impact of the related minimum return.

Amounts recognized in profit or loss in respect of these defined benefit plans are as follows:

For the Year Ended December 31 2013 2012

Current service cost $ 22,322 $ 22,056 Interest cost 20,094 18,658 Expected return on plan assets (13,879) (14,625) Past service cost 5,517 1,656

$ 34,054 $ 27,745

An analysis by function Operating expenses $ 34,054 $ 27,745

Actuarial gains and losses recognized in other comprehensive income for the years ended December 31, 2013 and 2012 was $160,298 thousand and $74,327 thousand, respectively. The cumulative amount of actuarial gains and losses recognized in other comprehensive income as of December 31, 2013 and 2012 was $234,625 thousand and $74,327 thousand, respectively.

The amount included in the consolidated balance sheet arising from the Bank’s obligation in respect of its defined benefit plans was as follows:

December 31, December 31, 2013 2012 January 1, 2012

Present value of funded defined benefit obligation $ (1,337,000) $ (1,149,848) $ (1,066,949) Fair value of plan assets 745,093 727,604 718,180

Deficit $ (591,907) $ (422,244) $ (348,769)

Net liabilities arising from defined benefit obligation $ (591,907) $ (422,244) $ (348,769)

Movements in the present value of the defined benefit obligations were as follows:

For the Year Ended December 31 2013 2012

Opening defined benefit obligation $ 1,149,848 $ 1,066,949 Current service cost 22,322 22,056 Interest cost 20,094 18,658 Actuarial losses 201,739 79,546 Past service cost 5,517 1,656 Benefits paid (62,520) (39,017)

Closing defined benefit obligation $ 1,337,000 $ 1,149,848

58

- 36 - Movements in the fair value of the plan assets were as follows:

For the Year Ended December 31 2013 2012

Opening fair value of plan assets $ 727,604 $ 718,180 Expected return on plan assets 13,879 14,625 Actuarial gains 10,276 4,108 Contributions from the employer 55,854 29,708 Benefits paid (62,520) (39,017)

Closing fair value of plan assets $ 745,093 $ 727,604

The percentages for the major categories of plan assets at December 31, 2013, December 31, 2012 and January 1, 2012 were as follows:

December 31, December 31, 2013 2012 January 1, 2012

Equity instruments 44 38 42 Cash 22 23 23 Fixed income 19 16 16 Debt instruments 10 11 12 Short-term securities 4 10 7 Others 1 2 -

100 100 100

The Bank chose to disclose the history of experience adjustments as the amounts determined for each accounting period prospectively from the date of transition to IFRSs:

December 31, December 31, 2013 2012 January 1, 2012

Present value of defined benefit obligation $ (1,337,000) $ (1,149,848) $ (1,066,949) Fair value of plan assets $ 745,093 $ 727,604 $ 718,180 Deficit $ (591,907) $ (422,244) $ (348,769) Experience adjustments on plan liabilities $ (202,795) $ (79,546) $ - Experience adjustments on plan assets $ 10,276 $ 4,108 $ -

The Bank expects to make a contribution of $25,762 thousand and $25,209 thousand, respectively to the defined benefit plans during the annual period beginning after 2013 and 2012.

24. OTHER LIABILITIES

December 31, December 31, 2013 2012 January 1, 2012

Advance receipts $ 1,503,285 $ 784,245 $ 637,947 Guarantee deposit received 79,066 141,829 54,964 Others 4,081 1,523 12,353

$ 1,586,432 $ 927,597 $ 705,264

59

- 37 - 25. EQUITY

December 31 December 31, 2013 2012 January 1, 2012

Common stock $ 26,197,534 $ 22,212,780 $ 20,512,780 Capital surplus 870,795 365,754 365,754 Retained earnings 8,779,843 7,862,754 5,855,848 Other equity 781,532 1,119,661 600,062

$ 36,629,704 $ 31,560,949 $ 27,334,444

Common Stock

As of January 1, 2012, the Bank has authorized and issued common stocks totaling $20,512,780 thousand, divided into 2,051,278 thousand common shares at $10 par value per share. In August 2012, the Bank transferred unallocated surplus $1,700,000 thousand to common stocks. As of December 31, 2012, the Bank has increased common stocks to $22,212,780 thousand, divided into 2,221,278 thousand common shares at $10 par value per share.

In July 2013, the Bank transferred unallocated surplus $2,484,379 thousand to common stocks. In September 2013, the Bank has proposed capital increase by cash, issued 150,038 thousand common shares at $12 per share, and it conducted capital surplus $499,625 thousand. As of December 31, 2013, the Bank has increased common stocks to $26,197,534 thousand, divided into 2,619,753 thousand common shares at $10 par value per share.

Capital Surplus

December 31 December 31, 2013 2012 January 1, 2012

Premium on capital stock $ 865,379 $ 365,754 $ 365,754 Employee stock options 5,416 - -

$ 870,795 $ 365,754 $ 365,754

The capital surplus from shares issued in excess of par (additional paid-in capital from issuance of common shares, conversion of bonds, treasury stock transactions and arising from the excess of the consideration received over the carrying amount of the subsidiaries’ net assets during disposal or acquisition) and donations may be used to offset a deficit; in addition, when the Bank has no deficit, such capital surplus may be distributed as cash dividends or transferred to capital (limited to a certain percentage of the Bank’s paid-in capital and once a year).

The capital surplus from long-term investments, employee stock options and conversion options may not be used for any purpose.

In June 2013, SKFHC (the Bank’s parent company) increased capital by cash, released 24,310 thousand employee stock to the Bank’s employees, the Bank recognized $5,416 thousand as salary and capital surplus.

Retained Earnings

The Bank’s Articles of Incorporation provide that the Bank’s annual earnings shall be appropriated in the following order:

a. Payment of taxes; 60

- 38 - b. Offset accumulated deficit, if any; c. 30% thereafter, if any, as legal reserve; d. Special reserve to be distributed after deliberation; e. 1% thereafter, if any, as bonus to employees; f. The remainder plus the beginning balance of unappropriated earnings is to be distributed as dividend to the shareholder.

The appropriation of item (f) will be proposed and approved by the Board of Directors. However, the Board of Directors may consider the Bank’s actual condition and decide not to distribute any or part of earnings.

According to the ROC Banking Law, the maximum cash dividends may not exceed 15% of the amount of capital until such reserve equals the amount of capital. Cash or assets distribution should be restricted if the capital adequacy ratio does not reach the authority’s requirement.

Since the Bank is 100% owned by Shin Kong Financial Holding Co., Ltd., in order to ensure that there are adequate working capitals available for the expansion of Shin Kong Financial Holding Co., Ltd. operations and so as to increase its profitability, dividends may be distributed in a combination of cash and stock. However, the cash dividends should not be less than 10% of the current year’s distributable amount for stockholder dividends, and the rest will be stock dividends.

The estimated amount of bonus to employees is based on the Bank’s Articles of Incorporation. For the years 2013 and 2012, after distributing 30% of income after tax as legal reserve and distributing for special reserve according to the ROC Banking Law and regulations, 1% maybe distributed as bonus to employees. For the years ended December 31, 2013 and 2012, the bonus to employees was $28,432 thousand and $29,844 thousand, respectively. If the actual amounts subsequently resolved by the shareholder differ from the proposed amounts, the differences are recorded in the year of shareholder’s resolution as a change in accounting estimate.

The proposal for distribution of 2012 and 2011 earnings was approved by the Board of Directors on behalf of the shareholder on April 10, 2013 and March 28, 2012. The amount is as follows.

Years Ended December 31 2012 2011 Earnings Dividend Earnings Dividend Distribution Per Share Distribution Per Share

Provision of legal reserve $ 1,279,019 $ - $ 941,455 $ - Cash dividend 500,000 0.23 500,000 0.24 Stock dividend 2,484,379 1.12 1,700,000 0.83

61

- 39 - The proposal for bonus to employees and compensation to directors and supervisors of 2012 and 2011 earnings was approved by the Board of Directors on behalf of the shareholder on April 10, 2013 and March 28, 2012. The amount is as follows:

Years Ended December 31 2012 2011 Compensation Compensation to Directors to Directors Bonus to and Bonus to and Employees Supervisors Employees Supervisors

Approved by the Board of Directors on behalf of the shareholder $ 29,844 $ - $ 21,967 $ - Recognized in financial statements 29,844 - 22,282 -

$ - $ - $ (315) $ -

The difference between the proposed amount for distribution to employees and the amount recognized in the annual financial statement was recorded as a change in accounting estimate. Related information associated with this appropriation is available at the Market Observation Post System website.

Special Reserves Appropriated Following First-time Adoption of IFRSs

The Bank had a decrease in retained earnings due to the first adoption of IFRSs; therefore, no special reserve was appropriated.

Others Equity Items

Exchange Unrealized Differences on Gain from Translating Available-for- Foreign sale Financial Operations Assets

January 1, 2012 $ - $ 600,062 Available-for-sale financial assets Valuation adjustment - 529,195 Cumulative translation adjustment (9,596) -

December 31, 2012 $ (9,596) $ 1,129,257

January 1, 2013 $ (9,596) $ 1,129,257 Available-for-sale financial assets Valuation adjustment - (345,112) Cumulative translation adjustment 6,983 -

December 31, 2013 $ (2,613) $ 784,145

62

- 40 - 26. NET PROFIT FROM CONTINUING OPERATIONS

Net profit from continuing operations had been arrived at after charging or crediting:

Interest Revenue

For the Year Ended December 31 2013 2012

Interest income Notes discounted and loans $ 11,044,583 $ 10,209,671 Due from Central Bank of China and banks 914,960 894,099 Investment in securities 936,949 602,085 Others 603,779 687,373 13,500,271 12,393,228 Interest expense Deposits 4,489,280 4,209,579 Financial debentures 548,628 501,980 Others 64,590 93,482 5,102,498 4,805,041

$ 8,397,773 $ 7,588,187

Service Fee, Net

For the Year Ended December 31 2013 2012

Service fee income Bond fund $ 1,030,049 $ 795,714 Banks and insurance 885,611 978,675 Credit cards 783,178 745,292 Giving credit 518,022 486,707 Fiducial business 68,729 57,017 Others 468,071 441,491 3,753,660 3,504,896 Service fee expense Credit cards 664,058 607,284 Others 373,113 458,606 1,037,171 1,065,890

$ 2,716,489 $ 2,439,006

Gain on Financial Assets and Liabilities at Fair Value (Through Profit or Loss, Net)

For the Year Ended December 31 2013 2012

Realized profit and loss Bonds $ 85,454 $ 84,043 Beneficiary certificates (21,241) 11,841 Derivative financial instrument 389,061 85,561 Others 60,705 24,293 513,979 205,738 (Continued)

63

- 41 - For the Year Ended December 31 2013 2012

Valuation Bonds $ 4,894 $ 27,222 Beneficiary certificates (8,245) 15,355 Derivative financial instrument 129,397 257,901 126,046 300,478

$ 640,025 $ 506,216 (Concluded)

Realized profit and loss of gain on financial assets and liabilities at fair value (through profit or loss, net) includes disposal profit or loss amounted to $417,230 thousand and $160,705 thousand, interest income amounted to $94,559 thousand and $45,033 thousand, and dividends amounted to $2,190 thousand and $0 thousand, respectively.

Realized Gain on Available-for-sale Financial Assets, Net

For the Year Ended December 31 2013 2012

Dividend and bonus $ 104,991 $ 707,843 Gain on disposal Bonds 69,344 - Stocks 28,163 68,617 Others - 143,440

$ 202,498 $ 919,900

Employee Benefits Expense

For the Year Ended December 31 2013 2012

Salaries $ 3,115,472 $ 2,977,405 Labor and health insurance 245,824 218,889 Pension expense 150,000 135,241 Other employee expenses 130,841 127,499

$ 3,642,137 $ 3,459,034

Depreciation and Amortization

For the Year Ended December 31 2013 2012

Property, plant and equipment $ 246,951 $ 271,599 Intangible assets 97,381 64,216

$ 344,332 $ 335,815

64

- 42 - Business Expenses and General and Administrative Expenses

For the Year Ended December 31 2013 2012

Rental $ 583,116 $ 526,338 Taxes 400,056 384,421 Insurance 342,971 319,880 Advertisement 180,593 124,768 Repair and maintenance 117,656 98,589 Professional service 142,776 112,753 Postage 138,751 129,967 Others 633,247 589,368

$ 2,539,166 $ 2,286,084

27. INCOME TAXES RELATING TO CONTINUING OPERATIONS

Income Tax Recognized in Profit or Loss

The major components of tax expense were as follows:

For the Year Ended December 31 2013 2012

Current tax In respect of the current period $ 184,101 $ 125,356 Deferred tax In respect of the current period 301,564 (378,476) Loss carryforward - consolidated 200,752 827,683 502,316 449,207

Income tax expense recognized in profit or loss $ 686,417 $ 574,563

A reconciliation of accounting profit and income tax expenses/average effective tax rate and the applicable tax rate is as follows:

For the Year Ended December 31 2013 2012

Profit before tax from continuing operations $ 4,748,183 $ 4,855,796

Income tax expense calculated at the statutory rate (17%) $ 807,191 $ 825,485 Tax-exempt income (234,589) (231,998) Additional income tax under the Alternative Minimum Tax Act 154,690 109,192 Others (40,875) (128,116)

Income tax expense recognized in profit or loss $ 686,417 $ 574,563

The applicable tax rate used above is the corporate tax rate of 17% payable by the Bank in ROC.

As the status of 2014 appropriations of earnings is uncertain, the potential income tax consequences of 2013 unappropriated earnings are not reliably determinable.

65

- 43 - Income Tax Recognized in Other Comprehensive Income

For the Year Ended December 31 2013 2012

Current tax

Actuarial gains and losses on defined benefit plan $ (32,276) $ (15,224)

Current Tax Assets and Liabilities

December 31, December 31, 2013 2012 January 1, 2012

Current tax assets Consolidated income tax refundable $ - $ 383,609 $1,148,551

Current tax liabilities Consolidated income tax payable $ 249,838 $ - $ - Income tax payable 14,677 14,620 16,752

$ 264,515 $ 14,620 $ 16,752

Deferred Tax Assets and Liabilities

The Bank offset certain deferred tax assets and deferred tax liabilities which met the offset criteria.

The movements of deferred tax assets and deferred tax liabilities were as follows:

For the year ended December 31, 2013

Recognized in Other Opening Recognized in Comprehensive Closing Balance Profit or Loss Income Balance Deferred tax assets

Temporary differences Defined benefit obligation $ 64,256 $ (3,647) $ - $ 60,609 Actuarial gain and loss arising from defined benefit plans 15,224 - 32,276 47,500 Allowance for doubtful accounts 110,252 (11,311) - 98,941 Loss carryforward 1,016,912 (257,154) - 759,758 Others (32,486) (14,912) - (47,398)

$ 1,174,158 $ (287,024) $ 32,276 $ 919,410

Deferred tax liability

Temporary differences Goodwill amortization $ 136,893 $ 14,516 $ - $ 151,409 Reserve for land revaluation increment tax 222,370 (3) - 222,367 Others 65 27 - 92

$ 359,328 $ 14,540 $ $ 373,868 66

- 44 - For the year ended December 31, 2012

Recognized in Other Opening Recognized in Comprehensive Closing Balance Profit or Loss Income Balance

Deferred tax assets

Temporary differences Defined benefit obligation $ 64,523 $ (267) $ - $ 64,256 Actuarial gain and loss arising from defined benefit plans - - 15,224 15,224 Allowance for doubtful accounts 65,728 44,524 - 110,252 Loss carryforward 648,627 368,285 - 1,016,912 Others (12,959) (19,527) - (32,486)

$ 765,919 $ 393,015 $ 15,224 $ 1,174,158

Deferred tax liability

Temporary differences Goodwill amortization $ 122,377 $ 14,516 $ - $ 136,893 Reserve for land revaluation increment tax 222,370 - - 222,370 Others 42 23 - 65

$ 344,789 $ 14,539 $ - $ 359,328

Information About Unused Investment Credits, Uunused Loss Carry-forward and Tax-exemption

Loss carryforwards as of December 31, 2013 comprised of:

Remaining Creditable Amount Expiry Year

$ 3,409,068 2016 1,060,094 2019

$ 4,469,162

Integrated Income Tax

December 31, December 31, 2013 2012 January 1, 2012

Unappropriated earnings

Unappropriated earnings generated on and after January 1, 1998 $ 5,234,206 $ 5,596,136 $ 4,530,685 Imputation credits accounts $ 22,533 $ 76,873 $ 125,232

The creditable ratio for distribution of earnings of 2013 and 2012 was 0.43% (expected ratio) and 1.37%, respectively. 67

- 45 - Under the Income Tax Law, for distribution of earnings generated after January 1, 1998, the imputation credits allocated to ROC resident shareholders of the Bank was calculated based on the creditable ratio as of the date of dividend distribution. The actual imputation credits allocated to shareholders of the Bank was based on the balance of the Imputation Credit Accounts (ICA) as of the date of dividend distribution. Therefore, the expected creditable ratio for the 2013 earnings may differ from the actual creditable ratio to be used in allocating imputation credits to the shareholders.

According to legal interpretation No. 10204562810 announced by the Taxation Administration of the Ministry of Finance, when calculating imputation credits in the year of first-time adoption of IFRSs, the cumulative retained earnings include the net increase or net decrease in retained earnings arising from first-time adoption of IFRSs.

Income Tax Assessments

As of December 31, 2013, the Bank’s income tax returns through 2007 had been assessed and approved by the tax authority. In the assessment of the Bank’s income tax returns for 2004, 2005 and 2006, the amortization of bond investment amounting to $64,840 thousand and $61,904 thousand and the amortization amount of goodwill from acquisition of Credit Cooperatives, amounting $26,334 thousand were not recognizable. The Bank did not agree with the assessed result and is in the process of litigation with the authority.

28. EARNINGS PER SHARE

For the Year Ended December 31 2013 2012

Basic EPS $ 1.62 $ 1.73 Diluted EPS $ 1.62 $ 1.73

The earnings and weighted average number of ordinary shares outstanding in the computation of earnings per share from continuing operations were as follows:

Net Profit for the Period

For the Year Ended December 31 2013 2012

Profit for the period attributable to owner of the Bank $ 4,061,766 $ 4,281,233

Weighted average number of ordinary shares outstanding (in thousand shares):

For the Year Ended December 31 2013 2012

Weighted average number of ordinary shares in computation of basic earnings per share 2,509,178 2,469,716 Effect of dilutive potential ordinary shares: Bonus issue to employee 2,610 2,499

Weighted average number of ordinary shares used in the computation of diluted earnings per share 2,511,788 2,472,215

68

- 46 - The weighted average number of shares outstanding for EPS calculation has been retroactively adjusted for the issuance of stock dividends for the year ended December 31, 2012. This adjustment caused the basic after income tax EPS for the year ended December 31, 2012 to decrease from NT$1.92 to NT$1.73.

These bonuses were previously recorded as appropriations from earnings. If the Bank may settle the bonus to employees by cash or shares, the Bank should presume that the entire amount of the bonus will be settled in shares and the resulting potential shares should be included in the weighted average number of outstanding shares used in the calculation of diluted earnings per share, if the shares have a dilutive effect. The number of shares is estimated by dividing the entire amount of the bonus by the closing price of the shares at the balance sheet date. The dilutive effect of the potential shares should be included in the calculation of diluted earnings per share until the stockholders resolve the number of shares to be distributed to employees at their meeting in the following year.

29. DISPOSAL OF SUBSIDIARIES

On August 30, 2013, the Bank entered into a sale agreement to dispose of Shin Kong Property Insurance Agency Co., Ltd. with SKFHC. Disposal price was based on the disposal was completed on September 30, 2013, on which dates control of Shin Kong Property Insurance Agency Co., Ltd. passed to the acquirer.

a. Consideration received from the disposal

December 31, 2013

Consideration received in cash and cash equivalents $ 7,724 Sales proceeds receivable -

Total consideration received $ 7,724

b. Analysis of asset and liabilities on the date control was lost

December 31, 2013

Current assets Cash and cash equivalents $ 8,334 Trade receivables 654 Inventories 200 Current liabilities Payables (735)

Net assets disposed of $ 8,453

c. Loss on disposal of subsidiary

For the Year Ended December 31, 2013

Consideration received $ 7,724 Net assets disposed of (8,453)

Loss on disposal $ (729) 69

- 47 - d. Net cash outflow on disposal of subsidiary

For the Year Ended December 31, 2013

Consideration received in cash and cash equivalents $ 7,724 Less: Cash and cash equivalent balances disposed of (8,334)

$ (610)

30. RELATED PARTY TRANSACTIONS

Related Party Relationship

Shin Kong Financial Holding Co., Ltd. (SKFHC) Parent company of the Bank Zeng-Chang, Li Key management personnel Jin-Yuan, Lai Key management personnel Bo-Han, Lin, etc. Key management personnel Sheng-Yi, Hu, etc. Key management personnel Zhong-Her, Chen, etc. Key management personnel Hong-Ren, Huang, etc. Key management personnel Shin Kong Life Insurance Co., Ltd. (SKLIC) Fellow subsidiaries related to the others Shin Kong Investment Trust Co., Ltd. (SKITC) Fellow subsidiaries related to the others Taiwan Shin Kong Insurance Brokerage Co., Ltd. Fellow subsidiaries related to the others (TSKIBC) Master Link Securities Co., Ltd. Fellow subsidiaries related to the others Shin Kong Securities Co., Ltd. (SKSC) (Note 1) Fellow subsidiaries related to the others Shin Kong Venture Capital International Co., Ltd. Fellow subsidiaries related to the others Shin Kong Property Insurance Agency Co., Ltd. (Note 2) Fellow subsidiaries related to the others Shin Kong Mitsukoshi Dept. Store Co., Ltd. Legal director of SKFHC Dong-Jin, Wu President of SKFHC Peng, Shiu Vice president and general manager of SKFHC Yun-Wan, Ye; Bo-Han, Lin; Wen-Dong, Hong; Current directors of SKFHC Dong-Sheng, Wu; Xi-En, Wu; Gui-Lan, Wu; Xin-Yin, Wu; Ji-Shi, Zheng; Wen-Chi, Wu; Jheng-Yi Lee; Peng, Shiu, Shi Jie, Huang; Ming Wei, Wu and Tsui-Mei, Wu-Wen Qi-Ming, Su; Shi-Fei, Chen; Yuan-Ju, Huang; He-Jen, Current supervisors of SKFHC Huang Mien Hau Co., Ltd. Legal supervisor of SKFHC Hsien-Hsien Shiu, etc. The spouses and kinsfolk of presidents, vice presidents and managers of SKFHC and the Bank Yi-Shan, Wang, etc. The spouses of directors and supervisors of SKFHC and the Bank Dong-Quan, Wu, etc. The presidents, directors, supervisors and managers of SKLIC, SKITC, SSIC, SKSC and TSKIBC and their spouses Shin Kong Wu Ho-Su Hospital The person in charge is the president of SKFHC Shin Kong Wu Foundation The person in charge is the president of SKFHC Shin Kong Wu Ho-Su Cultural Foundation The person in charge is the president of SKFHC Shin Kong Charity Foundation The person in charge is the president of SKFHC (Continued) 70

- 48 - Related Party Relationship

Wu Ho-Su Emergency Foundation The person in charge is the president of SKFHC Lian Sin Cultural Foundation The person in charge is the president of SKFHC Wu Dong-Jin Charity Foundation The person in charge is the president of SKFHC Shin Kong Life Insurance Scholarship Foundation The person in charge is the president of SKFHC Dong Yin Investment Co., Ltd., etc. The person in charge is the spouse of the president of SKFHC First International Telecom Co., Ltd. (FIT) The supervisor of SKLIC is the reorganization supervisor of FIT Shin Kong Apartments Maintenance and Management Related party in substance Co., Ltd. Quen He Capital Venture Co., Ltd. Related party in substance Tai Zi Car Industry Co., Ltd. Related party in substance UBright Optronics Co., Ltd. Related party in substance Dong Xian Investment Co., Ltd. Related party in substance Shin Kong Compose Fiber Co., Ltd. Related party in substance Shin Kong Construction and Development Co., Ltd. Related party in substance Shin Kong Ocean Enterprise Co., Ltd. Related party in substance Shin Ker Bright Optronic Materials Co., Ltd. Related party in substance Shin Sheng Co., Ltd. Related party in substance Shin Kong Le Huo Co., Ltd. Related party in substance Rui Xing Enterprise Co., Ltd. Related party in substance Hong Xing Construction Co., Ltd. Related party in substance Shin Kong Chao Feng Co., Ltd. Related party in substance Tai Shin Financial Holding Co., Ltd., etc. Related party in substance Shin Kong Textile Co., Ltd. Related party in substance Shin Kong Property Insurance Co., Ltd. Related party in substance Jia Bang Investment Co., Ltd. Related party in substance Shin Shin International Co., Ltd. Related party in substance Wen Shih Management Consulting Co., Ltd. Related party in substance Wang Tien Woolen Textile Co., Ltd. Related party in substance Taiwan Shin Kong Security Co., Ltd. Related party in substance Yi Guang Security Co., Ltd. Related party in substance Yi Guang International Apartments Maintaince and Related party in substance Management Co., Ltd. Bai Yun Shan Chuan Enterprise Co., Ltd. Related party in substance Jau Bang Investment Co., Ltd. Related party in substance Chi Yuan Investment Co., Ltd. Related party in substance Jia He Enterprise Co., Ltd. Related party in substance Shin Ming Investment Co., Ltd. Related party in substance Shin Shin Enterprise Co., Ltd. Related party in substance Hung Chi Co., Ltd. Related party in substance Tac Bright Optronics Co., Ltd. Related party in substance Taiwan Shin Kong Building Management Related party in substance Shih Jen Investment Co., Ltd. Related party in substance The Great Taipei Gas Corporation Related party in substance Shin Yi Construction Co., Ltd. Related party in substance (Concluded)

Note 1: Shin Kong Securities Co., Ltd. dissolved on January 5, 2010. As of December 31, 2013, it was proceeding with liquidation procedures.

Note 2: The Bank sold all stocks of Shin Kong Property Insurance Agency Co., Ltd. to SKFHC on September 30, 2013. 71

- 49 - Note 3: Above related parties were classified as parent company, fellow subsidiaries related to the others, key management personnel, related party in substance and other related party.

Loans

2013 Compliance The Difference Highest Balance, End Interest Between Related Numbers/Name Performing Collaterals Balance of the Year Overdue Loans Revenue and Non-related Loans Party Employees consumption 29 $ 17,639 $ 9,773 $ 9,773 $ - Car $ 286 None loans Loans on mortgage 50 269,263 221,357 221,357 - Real estate 3,875 None Other loans Related parties in substance Shin Kong Chao Feng 788,250 786,250 786,250 - Real estate 14,645 None Wang Tien Woolen 500,000 500,000 500,000 - Real estate 9,964 None Textile Jia Bang Investment 407,984 394,998 394,998 - Real estate 7,821 None Shin Ker Bright Optronic 343,000 128,000 128,000 - Equipment 3,094 None Materials Hong Chi Company 88,660 88,660 88,660 - Real estate, public trade 1,332 None stock Jia He Enterprise 78,165 77,205 77,205 - Real estate 2,331 None Hsin-ming Enterprise 73,000 65,000 65,000 - Real estate, private stock 1,390 None Hsin-Pei Enterprise 72,000 50,000 50,000 - Real estate, private stock 1,224 None Wen Shih Management 62,640 62,640 62,640 - Real estate, public trade 980 None Consulting stock Others 746,441 85,961 85,961 - Real estate, public trade 2,927 None stock, equipment Other related parties Dong Yin Investment 70,000 70,000 70,000 - Public trade stock 1,120 None First International 35,996 28,369 - 28,369 Real estate, equipment - None Telecom Others 413,022 262,160 262,160 - Real estate 5,513 None

2012 Compliance The Difference Highest Balance, End Interest Between Related Numbers/Name Performing Collaterals Balance of the Year Overdue Loans Revenue and Non-related Loans Party Employees consumption 25 $ 14,313 $ 7,069 $ 7,069 $ - Car $ 269 None loans Loans on mortgage 53 298,336 239,456 239,456 - Real estate 4,308 None Other loans Related parties in substance Tai Zi Car Industry 1,719,012 - - Real estate 44,668 None Shin Kong Chao Feng 690,250 689,250 689,250 - Real estate 11,022 None Wang Tien Woolen 498,000 498,000 498,000 - Real estate 9,987 None Textile Jia Bang Investment 409,089 407,984 407,984 - Real estate 8,171 None Shin Ker Bright Optronic 359,000 215,000 215,000 - Equipment 2,951 None Materials Jia He Enterprise 79,125 78,165 78,165 - Real estate 2,367 None Others 866,099 192,746 192,746 - Real estate, public trade 7,262 None stock, equipment Other related parties First International 90,496 35,996 - 35,996 Real estate, equipment - None Telecom Shin Kong Wu Ho-Su 80,000 80,000 80,000 - Public trade stock 869 None Hospital Dong Yin Investment 70,000 70,000 70,000 - Public trade stock 972 None Others 300,087 278,062 278,062 - Real estate, public trade 5,605 None stock, equipment

According to Article 32 and 33 of the Banking Law, credit loans cannot be made to related parties except loans to government and consumers; secured loans to related parties shall be provided with adequate collateral.

Guarantee

2013 Guarantee Highest Balance, End Reserve Company Balance of the Year Balance Ratio (%) Guarantee

Related parties in substance

Taiwan Shin Kong Security $ 8,025 $ 6,581 $ - 0.75 Real estate Shin Kong Textile 6,605 3,778 - 0.55 Public stocks Shin Kong Compose Fiber 560 - - 0.50 Public stocks Dong Xian Investment 200,000 - - 0.40-0.45 Real estate

$ 10,359 72

- 50 - 2012 Guarantee Highest Balance, End Reserve Company Balance of the Year Balance Ratio (%) Guarantee

Related parties in substance

Taiwan Shin Kong Security $ 5,393 $ 5,393 $ - 0.75 Real estate Shin Kong Textile 7,767 3,059 - 0.55 Public stocks Shin Kong Compose Fiber 560 560 - 0.50 Public stocks Dong Xian Investment 200,000 - - 0.50 Real estate Rui Xing Enterprise 70,000 - - 0.50 Real estate

$ 9,012

Derivative Financial Instruments

(In Thousands of NT$/US$/JPY)

2013 Derivative Financial Notional Valuation Gain Ending Balance Company Period Instruments Principal or Loss Account Amount Fellow subsidiaries related to the others SKLIC Cross-currency swap 2013.04.02 - US$ 1,105,000 NT$ 308,483 Financial assets at fair NT$ 308,483 2014.05.21 value through profit or loss SKLIC Foreign exchange 2013.04.02 - US$ 1,430,000 NT$ 467,399 Financial assets at fair NT$ 467,399 forward 2014.05.07 value through profit or loss Related parties in substance Shin Ker Bright Foreign exchange 2013.11.15 - US$ 450 NT$ 171 Financial assets at fair NT$ 171 Optronics forward 2014.01.29 value through profit Materials or loss UBright Optronics Foreign exchange 2013.11.13- US$ 2,000 NT$ 897 Financial assets at fair NT$ 897 forward 2014.01.24 value through profit or loss

(In Thousands of NT$/US$/JPY)

2012 Derivative Financial Notional Valuation Gain Ending Balance Company Period Instruments Principal or Loss Account Amount Fellow subsidiaries related to the others SKLIC Cross-currency swap 2012.02.13- US$ 1,105,000 NT$ (423,637) Financial liabilities at NT$ (423,637) 2013.08.30 fair value through profit or loss SKLIC Foreign exchange 2012.03.05- US$ 1,105,000 NT$ (256,117) Financial liabilities at NT$ (256,117) forward 2013.09.05 fair value through profit or loss Related parties in substance UBright Optronics Foreign exchange 2012.09.20- US$ 6,600 NT$ 148 Financial assets at fair NT$ 148 forward 2013.02.22 value through profit or loss Shin Ker Bright Foreign exchange 2012.12.10- US$ 350 NT$ 24 Financial assets at fair NT$ 24 Optronics forward 2013.03.15 value through profit Materials or loss Shin Ker Bright Foreign exchange 2012.10.11- JPY 7,600 NT$ (283) Financial liabilities at NT$ (283) Optronics forward 2013.01.04 fair value through Materials profit or loss Shin Kong Foreign exchange 2012.12.14- US$ 1,000 NT$ 69 Financial assets at fair NT$ 69 Compose Fiber forward 2013.02.21 value through profit or loss

73

- 51 - Deposits

For the Year Ended December 31, 2013 Interest Ending Balance Interest Ratio Expense

Parent company

SKFHC $ 2,011,389 0.01%-1.37% $ 27,040

Fellow subsidiaries related to the others

SKLIC 36,526,494 0.00%-1.40% 172,184 Master Link Securities 3,459,818 0.00%-1.35% 28,436 Shin Kong Venture Capital International 229,269 0.17%-1.35% 2,308 SKITC 159,352 0.00%-2.80% 1,533 TSKIBC 59,378 0.00%-1.37% 509 Others 7,329 0.00%-1.12% 76 40,441,640 205,046 Related parties in substance

UBright Optronics 1,391,632 0.01%-1.36% 10,683 Shin Kong Property Insurance Agency 654,835 0.00%-1.37% 3,376 SBright Optronics 557,969 0.00%-0.88% 1,212 Yi Guang Securities 207,351 0.00%-0.17% 274 Taiwan Shin Kong Building Management 110,138 0.00%-0.17% 144 Shin Shin International 90,338 0.00%-1.35% 681 Shin Kong Compose Fiber 80,934 0.00%-0.17% 24 Shin Ker Bright Optronics Materials Co., Ltd. 78,356 0.00%-0.20% 89 Shin Sheng 76,717 0.00%-0.17% 119 Shin Yi Construction 72,019 0.00%-0.17% 28 Quen He Capital Venture 68,204 0.00%-0.05% 43 Hong Shin Construction 66,472 0.00%-0.17% 115 Shin Hsin Investment 62,333 0.05%-0.17% 11 Others 1,336,955 7,048 4,854,253 23,847 Other related parties

Shin Kong Wu-Ho-Su Hospital 264,211 0.00%-0.59% 263 Mian Hao Industrial 112,204 0.00%-0.05% 9 Shin Kong Wu Ho-Su Cultural Foundation 86,126 0.00%-1.38% 1,021 Others 494,263 6,734 956,804 8,027

$ 48,264,086 $ 263,960

74

- 52 - For the Year Ended December 31, 2012 Interest Ending Balance Interest Ratio Expense

Parent company

SKFHC $ 1,109,532 0.00%-1.37% $ 10,397

Fellow subsidiaries related to the others

SKLIC 33,344,013 0.00%-1.40% 208,051 Master Link Securities 3,768,643 0.00%-1.35% 37,204 Shin Kong Venture Capital International 208,272 0.17%-1.35% 2,104 SKITC 187,702 0.00%-1.37% 2,266 TSKIBC 108,228 0.00%-1.37% 740 Others 9,025 0.00%-1.12% 82 37,625,883 250,447 Related parties in substance

Shin Kong Property Insurance Agency 804,650 0.00%-1.37% 5,806 UBright Optronics 285,549 0.01%-1.37% 2,784 Shin Kong Compose Fiber 201,391 0.00%-0.17% 17 Yi Guang Securities 158,503 0.00%-0.17% 250 Taiwan Shin Kong Building Management 115,052 0.00%-0.17% 30 Quen He Capital Venture 111,409 0.05%-0.05% 18 Shin Shin International 84,218 0.00%-1.35% 718 Shin Sheng 82,871 0.00%-0.17% 99 Shin Kong Apartments Maintenance and Management 80,415 0.00%-1.35% 1,695 Shin Jen Investment 80,127 0.17%-0.85% 12 Shin Kong Textile 78,387 0.00%-1.23% 46 Others 1,136,814 4,634 3,219,386 16,109 Other related parties

Shin Kong Wu Ho-Su Hospital 150,910 0.00%-0.59% 252 Others 840,313 9,804 991,223 10,056

$ 42,946,024 $ 287,009

The transaction terms with related parties do not significantly differ from those with ordinary customers except for the 6.38% interest rate on the Bank’s employee deposits for both year of 2013 and 2012.

Service Fee Income

For the Year Ended December 31 2013 2012 Fellow subsidiaries related to the others

SKLIC $ 885,104 $ 978,674 Shin Kong Property Insurance Agency 7,028 7,745 Others 3,885 7,770

$ 896,017 $ 994,189

75 - 53 - The nature of transactions differed for each related party; therefore, comparison is impractical.

Service Fee Expense

For the Year Ended December 31 2013 2012

Fellow subsidiaries related to the others

Master Link Securities $ 1,174 $ 1,062 Others 889 835

$ 2,063 $ 1,897

The nature of transactions differed for each related party; therefore, comparison is impractical.

Lease Transaction

a. Rent expense and deposit

For the Year Ended December 31 2013 2012

Fellow subsidiaries related to the others

SKLIC $ 200,744 $ 171,439 Others 594 965

$ 201,338 $ 172,404

The lease terms for related parties did not differ significantly from non-related parties. The following are the details on the rent deposit:

For the Year Ended December 31 2013 2012

Fellow subsidiaries related to the others

SKLIC $ 47,455 $ 52,730 Others 2,260 2,342

$ 49,715 $ 55,072

b. Other business expense

For the Year Ended December 31 2013 2012

Fellow subsidiaries related to the others

SKLIC $ 4,964 $ 6,057

The expense is rental fee on related parties’ facilities where promotion activities are held. The transactions were on arm’s length terms and did not differ significantly from non-related parties.

76

- 54 - Professional Service Fee

For the Year Ended December 31 2013 2012

Fellow subsidiaries related to the others

SKLIC $ 10,907 $ 19,057 SKITC 1,620 1,620 Other 720 720

$ 13,247 $ 21,397

Other Transactions

The Bank and SKFHC, 100%-owner of the Bank, adopted the consolidated income tax return system to file their consolidated income tax returns since January 1, 2006. The consolidated income tax resulted in payable of $249,838 thousand as of December 31, 2013.

Guarantor of Credit

For the Year Ended December 31, 2013 Creditor Highest Balance Ending Balance

Key management personnel

Bang-Sheng, Wu Juan Bang Investment $ 2,093 $ 943 Shi-Qi, Hung Hung Chi 88,660 88,660 Shi-Qi, Hung Wen Shih Management Consulting 62,640 62,640 153,393 152,243 Other related parties

Tsui-Mei, Wu-Wen Jia Bang Investment 407,984 394,998 Tsui-Mei, Wu-Wen Tsui Yuan Investment 13,953 13,251 Dong-Sheng, Wu XinRui Wu 7,471 7,115 Qi-Ming, Su QiHong Su 30,000 15,000 459,408 430,364

$ 612,801 $ 582,607

For the Year Ended December 31, 2012 Creditor Highest Balance Ending Balance

Key management personnel

Bang-Sheng, Wu Bai Yun Shan Chuan Enterprise $ 301,175 $ - Bang-Sheng, Wu Shin Jia Bang Enterprise 1,132 1,046 Shi-Qi, Hung Hung Chi 60,000 60,000 Shi-Qi, Hung Wen Shih Management Consulting 60,405 60,405 422,712 121,451 (Continued)

77

- 55 - For the Year Ended December 31, 2012 Creditor Highest Balance Ending Balance

Other related parties

Tsui-Mei, Wu-Wen Jia Bang Investment $ 409,089 $ 407,984 Tsui-Mei, Wu-Wen Tsui Yuan Investment 14,535 13,953 Chong-Ren, Huang Powerchip Semiconductor 141,300 130,170 Dong-Sheng, Wu XinRui, Wu 7,500 7,471 Qi-Ming, Su Qi-Hong, Su 10,000 10,000 582,424 569,578

$ 1,005,136 $ 691,029 (Concluded)

Compensation of Directors, Supervisors and Key Management Personnel:

For the Year Ended December 31 2013 2012

Short-term benefits $ 70,699 $ 67,365 Post-employee benefits 1,037 1,016 Other long-term benefits 9,281 - Share-based payments 99 -

$ 81,116 $ 68,381

Disposal of Subsidiaries

The Bank disposed Shin Kong Property Insurance Agency Co., Ltd. on September 30, 2013, please refer to Note 29.

31. PLEDGED ASSETS

As of December 31, 2013 and 2012, certain assets were pledged as collaterals. Details are summarized as follows:

December 31 2013 2012

Held-to-maturity investment - government bonds $ 688,400 $ 554,300

Assets are pledged to district courts for litigation and for issuing financial debenture.

78

- 56 - 32. COMMITMENTS AND CONTINGENCIES

Commitments and contingencies were summarized as follows:

December 31 2013 2012

Guarantees $ 16,690,284 $ 12,903,877 Letters of credit 7,320,435 7,259,327 Trust liabilities 163,804,923 161,491,124 Loan commitments (excluding credit card) 209,265,271 182,790,055

According to Article 17 of the Implementation Rules of Trust Law, the Bank should disclose its balance sheet of trust account and its asset items, which were as follows:

Trust Account Balance Sheet December 31, 2013 (In Thousands of New Taiwan Dollars)

Trust Asset Amount Trust Liability Amount

Cash in banks Securities under custody payable The principal deposits in the Bank $ 2,161,543 Securities under custody payable $ 1,876,260 Short-term investments Trust capital Mutual fund 69,749,313 Funds and investment 142,102,478 Bond investments 70,494,751 Real estate trust 20,142,278 Common stock investments 18,573 Reserve and accumulated deficit Securities under custody Accumulated earnings (5,623,225) Securities under custody 1,876,260 Exchange (2,032) Real estate Net income 5,309,164 Land 15,964,565 Building 27,280 Construction in process 3,512,638

Trust assert $ 163,804,923 Trust liability $ 163,804,923

Trust Account Income Statement Year Ended December 31, 2013

Item Amount

Trust income Interest revenue $ 4,397 Preferred stock dividend income 1,499,196 Common stock dividend income 60 Gain on disposal of assets 3,685,189 Realized capital gain 2,644,189 Subtotal 7,833,031 Trust expense Management fee (30,956) Service fee (440) Loss on disposal of assets (2,492,052) Other fee (10) Subtotal (2,523,458) Income before income tax 5,309,573 Income tax expense (409)

Net income $ 5,309,164 79 - 57 - The summary of trust asset as of December 31, 2013 is as follows:

Item Amount

Cash in banks The principal deposits in the Bank $ 2,161,543 Short-term investments Mutual fund 69,749,313 Bond investments 70,494,751 Common stock investments 18,573 Securities under custody payable Securities under custody 1,876,260 Real estate Land 15,964,565 Building 27,280 Construction in process 3,512,638

$ 163,804,923

Trust Account Balance Sheet December 31, 2012

(In Thousands of New Taiwan Dollars)

Trust Asset Amount Trust Liability Amount

Cash in banks Securities under custody payable The principal deposits in the Bank $ 2,098,915 Securities under custody payable $ 1,905,905 Short-term investments Trust capital Mutual fund 75,809,841 Funds and investment 138,524,859 Bond investments 61,598,139 Real estate trust 21,399,533 Securities under custody Reserve and accumulated deficit Securities under custody 1,905,905 Accumulated earnings (4,608,326) Real estate Exchange (1,267) Land 16,317,641 Net income 4,270,420 Building 27,513 Construction in process 3,733,170

Trust assert $ 161,491,124 Trust liability $ 161,491,124

80

- 58 - Trust Account Income Statement Year Ended December 31, 2012

Item Amount

Trust income Interest revenue $ 4,885 Preferred stock dividend income 1,316,516 Gain on disposal of assets 4,190,825 Realized capital gain 1,637,104 Subtotal 7,149,330 Trust expense Management fee 20,337 Service fee (324) Loss on disposal of assets (2,898,438) Other fee (12) Subtotal (2,878,437) Income before income tax 4,270,893 Income tax expense (473)

Net income $ 4,270,420

The summary of trust asset as of December 31, 2012 is as follows:

Item Amount

Cash in banks The principal deposits in the Bank $ 2,098,915 Short-term investments Mutual fund 75,809,841 Bond investments 61,598,139 Securities under custody payable Securities under custody 1,905,905 Real estate Land 16,317,641 Building 27,513 Construction in process 3,733,170

$ 161,491,124

Operating Lease Arrangements

The Bank as lessee

Operating leases relate to leases of office with lease terms between 1 and 7 years. The Bank does not have a bargain purchase option to acquire the leased office at the expiry of the lease periods.

As of December 31, 2013 and 2012, refundable deposits paid under operating lease amounted to $224,684 thousand and $211,070 thousand, respectively.

81

- 59 - The future minimum lease payments of non-cancellable operating lease committee were as follows:

December 31 2013 2012

Not later than 1 year $ 464,145 $ 384,433 Later than 1 year and not later than 5 years 1,072,321 981,308 Later than 5 years 2,002 -

$ 1,538,468 $ 1,365,741

The Bank as lessor

Operating leases relate to the property owned by the Bank with lease terms between 5 to 10 years. The lessee does not have bargain purchase option to acquire the lease office at the expiry of the lease period.

As of December 31, 2013 and 2012, deposits received under operating leases amounted to $3,823 thousand, and $4,547 thousand, respectively.

The future minimum lease payments of non-cancellable operating lease were as follows:

December 31 2013 2012

Not later than 1 year $ 14,867 $ 15,839 Later than 1 year and not later than 5 years 18,339 30,085 Later than 5 years - 395

$ 33,206 $ 46,319

33. FINANCIAL INSTRUMENTS

Fair Value of Financial Instruments

December 31, 2013 December 31, 2012 January 1, 2012 Carrying Amount Fair Value Carrying Amount Fair Value Carrying Amount Fair Value

Financial assets

Cash and cash equivalents $ 23,140,511 $ 23,140,511 $ 16,525,167 $ 16,525,167 $ 10,320,038 $ 10,320,038 Due from the Central Bank and call loans to banks 120,850,612 120,850,612 129,336,837 129,336,837 110,495,816 110,495,816 Financial assets at fair value through profit or loss 19,512,146 19,512,146 3,479,449 3,479,449 5,198,999 5,198,999 Receivables 18,161,708 18,161,708 16,204,254 16,204,254 20,874,582 20,874,582 Notes and discounted loans 444,641,614 444,641,614 421,358,813 421,358,813 371,035,016 371,035,016 Available-for-sale financial assets 38,968,490 38,968,490 28,166,681 28,166,681 24,245,051 24,245,051 Held-to-maturity financial assets 10,622,757 10,642,461 3,473,329 3,578,557 3,513,154 3,578,557 Other assets 445,026 445,026 445,026 445,026 445,026 445,026

Financial liabilities

Due to the Central Bank and banks 4,152,993 4,152,993 3,221,695 3,221,695 7,842,865 7,842,865 Financial liabilities at fair value through profit or loss 3,464,639 3,464,639 1,245,021 1,245,021 2,274,883 2,274,883 Notes issued under repurchase agreements - - 3,731,418 3,731,418 3,823,256 3,823,256 Payables 9,784,681 9,784,681 11,374,958 11,374,958 15,872,096 15,872,096 Customer deposits and remittances 614,516,605 614,516,605 556,229,846 556,229,846 481,805,377 481,805,377 Financial debentures 18,500,000 18,500,000 23,800,000 23,800,000 19,800,000 19,800,000 Other financial liabilities 3,364,380 3,364,380 912,976 912,976 1,269,906 1,269,906 82

- 60 - The methods and assumptions used to estimate the fair values of financial instruments are summarized as follows: a. The carrying value reported in the balance sheet for short-term financial instruments approximate the fair value due to their short maturities or due to their amounts being similar to the amounts of receipt and payment of these instruments in the near future. This approach applies to cash and cash equivalents, due from Central Bank of China and banks, receivables (excluding income tax refundable), due to Central Bank of China and banks, notes issued under repurchase agreements, payables and remittance. b. If there is a quoted price in active market for financial instruments at fair value through profit or loss, available-for-sale financial assets, held-to-maturity investments and derivatives for hedge, the fair value of these financial instruments should be based on market price. Otherwise, valuation method should be used for estimation. The assumption of the valuation method for estimation used by the Bank is the same as those of the market participants.

Cash flow discount method should be used towards debt securities without active market. The Bank’s discount rate is equal to the remuneration rate of similar financial commodities’ realistic conditions and characteristics. These include debtor’s credit conditions, remaining period of fixed interest rate in accordance with the contract regulation, remaining period of capital payment and currency payment, etc. The Bank’s discount rate for financial commodities is 2.405% to 2.966%.

For those derivatives with no quoted market prices, their fair values are determined using valuation techniques incorporating estimates and assumptions consistent with those generally used by other market participants to price financial instruments. c. Notes discounted and loans, and deposits are interest-bearing financial instruments, so their carrying values approximate fair values. The carrying amount of delinquent loans is the estimated collectible amount which is the book value less allowance for bad debt; therefore, the fair value is determined at their carrying value. d. Financial instruments include securities that have not yet been listed and derivative without substantial effect. The fair value could not be measured reliably and the expense to obtain such fair value exceeds the reasonable cost range. The fair value of these instruments is determined at their carrying values. e. Cash flow discount method should be used for financial debenture. The Bank’s discount rate is equal to the remuneration rate of similar financial commodities’ realistic conditions and characteristics. The Bank’s discount rate is 2.338%.

Fair value of financial instruments represented by quoted price in active markets, or calculated by valuation method is listed as follows:

Quoted Price in Active Markets Amounts Calculated by Valuation Method December 31, December 31, January 1, December 31, December 31, January 1, 2013 2012 2012 2013 2012 2012

Financial assets Financial assets at fair value through profit or loss $ 19,512,146 $ 3,479,449 $ 5,198,899 $ - $ - $ - Available-for-sale financial assets 38,968,490 28,166,681 24,245,051 - - - Held-to-maturity investments - - - 10,642,461 3,578,557 3,578,557 Other financial assets - - - 445,026 445,026 445,026 Financial liabilities Financial liabilities at fair value through profit or loss 3,464,639 1,245,021 2,274,883 - - - Financial debenture - - - 18,500,000 23,800,000 19,800,000 Other financial liabilities - - - 3,364,380 912,976 1,269,906

83

- 61 - Financial Risk Information

a. Market risk

Fair values of bonds and bills investments, loans and other financial instruments of the Bank change when the interest rate fluctuates.

Value at risk, “VaR”

The Bank is using risk model to assess the value of trading portfolios and potential loss amount of holding positions. VaR is the Bank’s important internal risk control system, and the board of directors reviews and establishes trading portfolio’s limits annually. Actual exposures of the Bank are monitored daily by risk management.

VaR is used to estimate adverse market potential loss of existing positions. The VaR model uses historical simulation method, a one-year historical observation period, the estimate of 99% confidence interval, the maximum possible amount of loss holding positions for one day, and the probability that actual losses may exceed the estimate.

For the Year Ended December 31, 2013 Average Highest Lowest

Exchange VaR $ 55,043 $ 116,310 $ 17,696 Interest rate VaR 175,582 345,876 56,880 Equity securities VaR 46,945 109,892 22,413 Value at risk 184,249 392,585 61,991

For the Year Ended December 31, 2012 Average Highest Lowest

Exchange VaR $ 34,003 $ 65,600 $ 10,109 Interest rate VaR 65,282 172,746 27,951 Equity securities VaR 47,296 243,423 29,933 Value at risk 76,392 244,586 33,884

b. Credit risk

Credit risk may be caused by counterparties’ failure to perform their obligation associated with financial assets held by the Bank. The Bank follows a strict credit policy to assess and approve all credit lines and guarantees. The secured loans were 68.30% of the total loans on December 31, 2013. The percentage of guarantees and issuance of letters of credit secured by collaterals were 10.44%. The collaterals for loans, financing guarantees and letters of credit guarantees are cash, inventories, securities, plants and other assets. If the customers default, the Bank will execute its rights on the collateral in accordance with the terms of the contracts.

84

- 62 - Objects of assessing credit risks are including positive fair value of contracts on balance sheet and off-balance sheet commitments. Maximum exposure to credit risk of all financial instruments is the same as book value excluding items below:

December 31, 2013 Maximum Exposure of Financial Instrument Book Value Credit Risk

Guarantees $ - $ 16,690,284 Letters of credit - 7,320,435 Loan commitments (excluding credit card) - 209,265,271

When the other parties to the financial instruments consist of a single individual, or a concentration of entities with similar commercial activities, they may have similar abilities to fulfill their credit obligations. The Bank does not have such situation. The Bank’s credit exposure related to loans on December 31, 2013 was classified as follows:

Maximum Contract Exposure of Industry Amount Credit Risk

Individuals $ 250,406,942 $ 250,406,942 Finance and insurance 542,320,954 542,320,954 Manufacturing 74,829,492 74,829,492 Real estate and leasing 37,584,815 37,584,815 Wholesale and retail 32,782,360 32,782,360 Servicing 9,521,714 9,521,714 Utilities 301,368 301,368 Others 34,067,244 34,067,244

$ 981,814,889 $ 981,814,889

Maximum Contract Exposure of Region Amount Credit Risk

Domestic $ 669,414,874 $ 669,414,874 North America 79,012,212 79,012,212 Europe 113,826,480 113,826,480 Asia 59,813,984 59,813,984 Oceania 51,272,452 51,272,452 Africa 8,474,887 8,474,887

$ 981,814,889 $ 981,814,889

85

- 63 - - - - 86 (D) (D) (D) Net Net Net 8,381,1 7,896,830 8,058,872 128,634,881 446,402,496 134,807,697 422,392,126 113,000,133 371,713,039 (A)+(B)+(C) (A)+(B)+(C) (A)+(B)+(C) $ $ $ 23,859 22,719 25,857 34,075 535,226 196,173 562,832 178,393 937,779 Evidence of of Evidence of Evidence of Evidence Impairment Impairment Impairment Nonobjective Nonobjective Nonobjective $ $ $ 24 26,339 33,3 66,363 31,855 58,519 126,448 airment 2,611,663 2,848,607 2,177,053 Objective Objective Objective Objective sits are exposed to low credit risks risks credit to low are exposed sits Evidence of of Evidence of Evidence of Evidence Imp Impairment Impairment $ $ $ Provision for Impairment Losses (D) Provision for Impairment Losses (D) Provision for Impairment Losses (D) Bank’s remaining financial assets were were assets financial remaining Bank’s ,385 8,431,384 7,956,011 8,124,802 Total Total Total 128,784,048 449,549 135,070,233 425,803,565 113,237,045 374,827,871 (A)+(B)+(C) (A)+(B)+(C) (A)+(B)+(C) $ $ $ and call loans to banks, financial assets at fair value value fair at assets financial to banks, loans call and 26,500 33,343 33,554 82,987 200,835 145,128 2 5,652,498 5,930,576 4,746,515 Impaired (C) Impaired (C) Impaired (C) $ $ $ 9 January 1,January 2012 20,329 21,151 25,198 December 31, 2013 201 31, December 122,866 149,305 158,434 3,357,849 2,894,95 3,450,960 sified from other items) other from sified Impaired (B) Impaired (B) Impaired (B) $ $ $ rom the Central Bank Central the rom Past But Due Not Past But Due Not Past But Due Not f ioned above, the credit quality of the the quality credit above, ioned s, operating deposits, and settlement depo and settlement deposits, s, operating 8,282,018 7,773,363 7,932,814 128,562,884 440,539,038 134,903,954 416,978,030 113,128,860 366,630,396 - 64 - Subtotal (A) Subtotal (A) Subtotal (A) Subtotal $ $ $ 104,181 568,807 328,574 1,057,730 9,401,194 1,249,219 9,446,221 1,474,460 9,526,051 Weak Weak Weak $ $ $ 724,186 907,453 1,972,721 1,999,139 2,143,069 1,551,199 68,427,308 90,460,537 82,879,165 Neither Past Due Nor Impaired Nor Due Past Neither Impaired Nor Due Past Neither Impaired Nor Due Past Neither $ $ $ 5,251,567 4,525,005 4,315,285 Strong Medium Strong Medium Strong Mediu m 127,734,517 362,710,536 133,427,694 317,071,272 111,249,087 274,225,180 $ $ $ Item Item Item sheet items sheet items sheet items - - - balance balance balance Credit cards Credit Others cards Credit Others cards Credit Others - - - In Receivables Notes and discounted loans In Receivables Notes and discounted loans In Receivables Notes and discounted loans through profit or loss, securities purchased under resell agreement, deposit refund deposit agreement, resell under purchased securities loss, or profit through because the counterparties have rather high credit ratings. credit high rather have counterparties the because ment those for Except as follows: analyzed 1)reclas loans delinquent (including receivables and loans of analysis quality Credit 86 analysis impairment and non-performing quality credit assets Financial due equivalents, cash and cash as such Bank, the by held assets financial of Part 2) Credit quality analysis of notes and discounted loans neither past due nor impaired based on credit ratings of clients

(In Thousands of New Taiwan Dollars)

December 31, 2013 Item Neither Past Due Nor Impaired Strong Medium Weak Total Consumer loans Mortgage $ 167,206,728 $ 37,262 $ 41,269 $ 167,285,259 Cash card - - 3,474 3,474 Micro credit 23,093,732 5,491,725 1,055,276 29,640,733 Others 4,738,606 - 11,887 4,750,493 Corporate loans Secured 103,224,408 21,186,700 2,336,222 126,747,330 Unsecured 64,447,062 41,711,621 5,953,066 112,111,749 Total $ 362,710,536 $ 68,427,308 $ 9,401,194 $ 440,539,038

(In Thousands of New Taiwan Dollars)

December 31, 2012 Item Neither Past Due Nor Impaired Strong Medium Weak Total Consumer loans Mortgage $ 153,535,213 $ 67,693 $ 45,185 $ 153,648,091 Cash card - - 5,154 5,154 Micro credit - 26,337,625 384,822 26,722,447 Others 5,302,973 - 6,831 5,309,804 Corporate loans Secured 92,122,647 21,654,544 3,759,877 117,537,068 Unsecured 66,110,439 42,400,675 5,244,352 113,755,466 Total 317,071,272 90,460,537 9,446,221 416,978,030

(In Thousands of New Taiwan Dollars)

January 1, 2012 Item Neither Past Due Nor Impaired Strong Medium Weak Total Consumer loans Mortgage $ 138,736,128 $ 89,460 $ 60,171 $ 138,885,759 Cash card - - 8,210 8,210 Micro credit - 23,831,563 400,471 24,232,034 Others 5,832,540 - 8,370 5,840,910 Corporate loans Secured 76,169,955 17,719,621 4,482,747 98,372,323 Unsecured 53,486,557 41,238,521 4,566,082 99,291,160 Total 274,225,180 82,879,165 9,526,051 366,630,396

87

- 65 - 445,026 445,026 163,124 445,026 171,614 167,370 (D) (D) (D) Net Net Net 1,685,705 2,016,123 5,342,436 2,283,584 1,847,801 3,305,959 3,961,768 2,116,982 2,595,837 3,350,030 3,856,099 35,266,662 19,532,232 10,451,143 24,035,296 (A)+(B)+(C) - (A)+(B)+(C) - (A)+(B)+(C) - $ ------ion for Losses (D) Losses (D) Losses (D) Impairment Impairment Impairment Provision for Provis Provision for $ $ -$ $ -$ 445,026 445,026 163,124 445,026 171,614 167,370 1,685,705 2,016,123 5,342,436 2,283,584 1,847,801 3,305,959 3,961,768 2,116,982 2,595,837 3,350,030 3,856,099 Total Total Total 35,266,662 19,532,232 10,451,143 24,035,296 (A)+(B)+(C) (A)+(B)+(C) (A)+(B)+(C) $ ------Impaired (C) Impaired (C) Impaired (C) Impaired $ 3 2 ------Impaired (B) Impaired (B) Impaired (B) Impaired $-$-$ $-$-$ $ January 1, 2012 1, January Past But Due Not Past But Due Not Past But Due Not December 31, 201 31, December December 31, 201 31, December 445,026 445,026 163,124 445,026 171,614 167,370 ,305,959 1,685,705 2,016,123 5,342,436 2,283,584 1,847,801 3 3,961,768 2,116,982 2,595,837 3,350,030 3,856,099 35,266,662 19,532,232 10,451,143 24,035,296 Subtotal (A) Subtotal (A) Subtotal (A) $ - 66 ------ed 3 154,700 413,394 541,857 413,394 782,325 413,394 $ $ -$ $ -$ ------978,970 407,009 236,789 163,124 171,614 167,370 1,382,647 1,170,157 1,338,655 1,010,802 1,235,997 2,138,545 Neither Past Due Nor Impair Nor Due Past Neither Impaired Nor Due Past Neither Impaired Nor Due Past Neither $ $ $ - - - 31,632 31,632 31,632 552,035 677,468 611,804 457,292 5,342,436 1,334,718 3,305,959 3,961,768 1,097,868 3,350,030 3,856,099 Level 1Level 2 Level 3 Level 1Level 2 Level 3 Level 1Level 2 Level Level 33,884,015 18,362,075 10,451,143 23,024,494 $ $ $ credit financial assets credit financial Item Item Item sale financial assets financial sale assets financial sale assets financial sale - - - for for for aturity financial assets financial aturity - - - m assets financial maturity assets financial maturity s s s s s s s s s - - - assets assets assets to to to - - - Bond Stock Other Bonds Others Bonds Stocks Bond Stock Other Bonds Others Bonds Stocks Bond Stock Other Bonds Others Bonds Stocks Available Held Other Available Held Other Available Held Other 3) Credit quality analysis of non- 88 4) Aging analysis of financial assets that are past due but not impaired

December 31, 2013 Past Due Up to Past Due One to One Month Three Months Total

Receivables Credit cards $ 97,259 $ 25,607 $ 122,866 Others 13,834 6,495 20,329

$ 111,093 $ 32,102 $ 143,195

Notes and discounted loans Consumer loans Mortgage $ 1,072,866 $ 465,423 $ 1,538,289 Cash card 2,440 475 2,915 Micro credit 740,463 224,437 964,900 Others 29,879 10,485 40,364 1,845,648 700,820 2,546,468 Corporation loans 661,340 7,154 668,494 Secured 113,210 29,677 142,887 Unsecured 774,550 36,831 811,381

$ 2,620,198 $ 737,651 $ 3,357,849

December 31, 2012 Past Due Up to Past Due One to One Month Three Months Total

Receivables Credit cards $ 117,964 $ 31,341 $ 149,305 Others 15,561 5,590 21,151

$ 133,525 $ 36,931 $ 170,456

Notes and discounted loans Consumer loans $ 1,327,727 $ 312,585 $ 1,640,312 Mortgage 2,983 693 3,676 Cash card 840,977 213,223 1,054,200 Micro credit 49,945 13,041 62,986 Others 2,221,632 539,542 2,761,174 Corporation loans 36,887 4,003 40,890 Secured 18,151 74,744 92,895 Unsecured 55,038 78,747 133,785

$ 2,276,670 $ 618,289 $ 2,894,959

89

- 67 - January 1, 2012 Past Due Up to Past Due One to One Month Three Months Total

Receivables Credit cards $ 119,391 $ 39,043 $ 158,434 Others 19,191 6,008 25,199

$ 138,582 $ 45,051 $ 183,633

Notes and discounted loans Consumer loans $ 1,080,629 $ 424,558 $ 1,505,187 Mortgage 3,672 1,068 4,740 Cash card 855,130 239,501 1,094,631 Micro credit 43,818 12,584 56,402 Others 1,983,249 677,711 2,660,960 Corporation loans 123,685 10,233 133,918 Secured 618,414 37,668 656,082 Unsecured 742,099 47,901 790,000

$ 2,725,348 $ 725,612 $ 3,450,960

c. Liquidity risk

Ratios of liquidity reserves of the Bank both are 24% on December 31, 2013 and 2012, respectively. Since the capital and working capital are sufficient to perform all the contracted obligations, there will be no liquidity risk in this regard. Since derivatives have very little probabilities of failing to be sold at reasonable prices in the market, there will be very low liquidity risks.

The basic management policies of the Bank are matching maturity dates with interest rates of assets and liabilities and controlling unmatched gaps. The nature of uncertainty in those interest rates of assets and liabilities causes some unmatched gaps on the maturity day and could bring contingent profit or loss, thus the Bank adopts appropriate allocation method to evaluate Bank’s liquidity and liquidity analysis as follows:

(In Thousands of New Taiwan Dollars)

December 31, 2013 Over 1 Year to More than 0-1 Year 7 Years 7 Years Total

Assets

Cash and cash equivalents $ 23,140,511 $ - $ - $ 23,140,511 Due from Central Bank of China and banks 120,850,612 - - 120,850,612 Financial assets at fair value through profit or loss 18,730,978 781,168 - 19,512,146 Receivables 18,220,563 - - 18,220,563 Notes discounted and loans 146,360,326 135,105,082 168,083,977 449,549,385 Available-for-sale financial assets - 31,720,393 7,248,097 38,968,490 Held-to-maturity investments 950,227 7,178,959 2,493,571 10,622,757 Debt securities without active market - 898,500 4,443,936 5,342,436 Other delinquent loan 140,510 - - 140,510

$ 328,393,727 $ 175,684,102 $ 182,269,581 $ 686,347,410 (Continued)

90

- 68 - December 31, 2013 Over 1 Year to More than 0-1 Year 7 Years 7 Years Total

Liabilities

Due to Central Bank of China and banks $ 4,152,993 $ - $ - $ 4,152,993 Financial liabilities at fair value through profit or loss 3,464,639 - - 3,464,639 Payables 9,458,943 325,738 - 9,784,681 Income tax liabilities 264,515 - - 264,515 Customers deposits and remittances 490,049,370 124,467,235 - 614,516,605 Financial debenture - 14,000,000 4,500,000 18,500,000 Lease payable 9,788 7,342 - 17,130 Appropriated loan fund 5,029 5,029 - 10,058 Structure commodity capital - time deposits 626,225 137,867 2,573,100 3,337,192

$ 508,031,502 $ 138,943,211 $ 7,073,100 $ 654,047,813 (Concluded)

December 31, 2012 Over 1 Year to More than 0-1 Year 7 Years 7 Years Total

Assets

Cash and cash equivalents $ 16,525,167 $ - $ - $ 16,525,167 Due from Central Bank of China and banks 129,336,837 - - 129,336,837 Financial assets at fair value through profit or loss 2,378,213 1,101,236 - 3,479,449 Receivables 16,438,045 - - 16,438,045 Income tax assets 383,609 383,609 Notes discounted and loans 144,404,750 126,703,460 154,695,355 425,803,565 Available-for-sale financial assets - 9,766,438 18,400,243 28,166,681 Held-to-maturity investments 952,420 217,354 2,303,555 3,473,329 Debt securities without active market - - 3,961,768 3,961,768 Other delinquent loan 87,926 - - 87,926

$ 310,506,967 $ 137,788,488 $ 179,360,921 $ 627,656,376

Liabilities

Due to Central Bank of China and banks $ 3,176,643 $ 45,052 $ - $ 3,221,695 Financial liabilities at fair value through profit or loss 1,245,021 - - 1,245,021 Notes issued under repurchase agreements 3,731,418 - - 3,731,418 Payables 10,987,164 387,794 - 11,374,958 Customers deposits and remittances 447,317,934 108,911,912 - 556,229,846 Financial debenture 5,300,000 11,000,000 7,500,000 23,800,000 Lease payable 9,788 9,789 - 19,577 Appropriated loan fund 16,942 10,058 - 27,000 Structure commodity capital - time deposits 402,845 - 463,554 866,399

$ 472,187,755 $ 120,364,605 $ 7,963,554 $ 600,515,914

91

- 69 - January 1, 2012 Over 1 Year to More than 0-1 Year 7 Years 7 Years Total

Assets

Cash and cash equivalents $ 10,320,038 $ - $ - $ 10,320,038 Due from Central Bank of China and banks 110,495,816 - - 110,495,816 Financial assets at fair value through profit or loss 4,135,504 1,063,495 - 5,198,999 Receivables 21,114,761 - - 21,114,761 Income tax assets 1,148,551 - - 1,148,551 Notes discounted and loans 120,856,398 113,562,880 140,408,593 374,827,871 Available-for-sale financial assets 297,793 5,574,692 18,372,566 24,245,051 Held-to-maturity investments 8,400 1,117,653 2,387,101 3,513,154 Debt securities without active market - 212,030 3,644,069 3,856,099 Other delinquent loan 62,663 - - 62,663

$ 268,439,924 $ 121,530,750 $ 164,812,329 $ 554,783,003

Liabilities

Due to Central Bank of China and banks $ 7,835,865 $ 7,000 $ - $ 7,842,865 Financial liabilities at fair value through profit or loss 2,274,883 - - 2,274,883 Notes issued under repurchase agreements 3,823,256 - - 3,823,256 Payables 15,723,480 148,616 - 15,872,096 Customers deposits and remittances 388,051,702 93,753,675 - 481,805,377 Financial debenture - 15,300,000 4,500,000 19,800,000 Lease payable - 19,577 - 19,577 Appropriated loan fund 15,795 27,000 - 42,795 Structure commodity capital - time deposits 1,207,534 - - 1,207,534

$ 418,932,515 $ 109,255,868 $ 4,500,000 $ 532,688,383

Maturity analysis:

1) Maturity analysis of non-derivative financial liabilities

The Bank’s non-derivative financial liabilities presented based on the residual maturities from the balance sheet date to the contract maturity date were as follows:

December 31, 2013 Financial Instruments Item 0-30 Days 31-90 Days 91-180 Days 181 Days - 1 Year Over 1 Year Total Due to Central Bank of China and banks $ 79,113 $ 107,429 $ 238,350 $ 157,643 $ - $ 582,535 Due to Central Bank of China and other banks 3,570,458 - - - - 3,570,458 Payables 6,983,347 1,677,607 588,102 209,887 325,738 9,784,681 Deposits and remittances 149,235,864 105,074,593 93,111,109 142,627,804 124,467,235 614,516,605 Bank debentures - - - - 18,500,000 18,500,000 Other maturity items 1,642,532 26,704 411,581 122,777 3,696,701 5,900,295

December 31, 2012 Financial Instruments Item 0-30 Days 31-90 Days 91-180 Days 181 Days - 1 Year Over 1 Year Total Due to Central Bank of China and banks $ 67,416 $ 130,800 $ 324,401 $ 304,244 $ - $ 826,861 Due to Central Bank of China and other banks 2,103,474 - 291,360 - - 2,394,834 Notes issued under repurchase agreements 3,736,117 - - - - 3,736,117 Payables 8,483,995 1,555,690 605,381 342,098 387,794 11,374,958 Deposits and remittances 129,227,831 91,615,644 91,423,036 135,051,423 108,911,912 556,229,846 Bank debentures - - - 5,300,000 18,500,000 23,800,000 Other maturity items 1,113,390 58,763 56,589 12,152 1,035,312 2,276,206

92

- 70 - January 1, 2012 Financial Instruments Item 0-30 Days 31-90 Days 91-180 Days 181 Days - 1 Year Over 1 Year Total Due to Central Bank of China and banks $ 97,209 $ 132,476 $ 331,850 $ 383,238 $ 7,000 $ 951,773 Due to Central Bank of China and other banks 6,891,092 - - - - 6,891,092 Notes issued under repurchase agreements 3,824,742 - - - - 3,824,742 Payables 13,459,218 1,429,008 561,429 273,825 148,616 15,872,096 Deposits and remittances 78,144,546 79,109,168 94,133,307 136,664,681 93,753,675 481,805,377 Bank debentures - - - - 19,800,000 19,800,000 Other maturity items 976,623 26,096 6,076 12,152 1,264,773 2,285,720

2) Maturity analysis of derivative financial liabilities

a) Derivative instruments that settle on a net basis

(In Thousands of New Taiwan Dollars)

December 31, 2013 Financial Instruments Item 0-30 Days 31-90 Days 91-180 Days 181 Days - 1 Year Over 1 Year Total Derivative financial liabilities at fair value through profit or loss Foreign currency derivative $ 49,154 $ 71,495 $ 66,194 $ 23,904 $ - $ 210,747 Interest rate derivative - - 76 7,631 - 7,707 Total $ 49,154 $ 71,495 $ 66,270 $ 31,535 $ - $ 218,454

(In Thousands of New Taiwan Dollars)

December 31, 2012 Financial Instruments Item 0-30 Days 31-90 Days 91-180 Days 181 Days - 1 Year Over 1 Year Total Derivative financial liabilities at fair value through profit or loss Foreign currency derivative $ 4,160 $ 2,820 $ 1,058 $ 548 $ - $ 8,586 Interest rate derivative ------Total $ 4,160 $ 2,820 $ 1,058 $ 548 $ - $ 8,586

(In Thousands of New Taiwan Dollars)

January 1, 2012 Financial Instruments Item 0-30 Days 31-90 Days 91-180 Days 181 Days - 1 Year Over 1 Year Total Derivative financial liabilities at fair value through profit or loss Foreign currency derivative $ - $ - $ - $ - $ - $ - Interest rate derivative - (337) (340) (451) - (1,128) Total $ - $ (337) $ (340) $ (451) $ - $ (1,128)

b) Derivative instruments that settle on a gross basis

December 31, 2013 Item 0-30 Days 31-90 Days 91-180 Days 181 Days - 1 Year Over 1 Year Total Foreign currency derivative instruments Outflows $ 56,119,300 $ 76,397,944 $ 66,386,529 $ 6,308,852 $ 3,706,079 $ 208,918,704 Inflows 56,137,083 76,481,245 66,424,972 6,327,236 3,739,184 209,109,720 Interest rate derivative instruments Outflows 208,235 - 294,450 89,865 602,345 1,194,895 Inflows 208,235 - 294,450 89,865 602,345 1,194,895 Total outflows $ 56,327,535 $ 76,397,944 $ 66,680,979 $ 6,398,717 $ 4,308,424 $ 210,113,599 Total inflows $ 56,345,318 $ 76,481,245 $ 66,719,422 $ 6,417,101 $ 4,341,529 $ 210,304,615 Net flows $ 17,783 $ 83,301 $ 38,443 $ 18,384 $ 33,105 $ 191,016

December 31, 2012 Item 0-30 Days 31-90 Days 91-180 Days 181 Days - 1 Year Over 1 Year Total Foreign currency derivative instruments Outflows $ 42,399,749 $ 38,147,387 $ 34,902,360 $ 39,283,345 $ 1,414,217 $ 156,147,058 Inflows 42,458,204 38,186,291 34,937,737 39,348,761 1,413,078 152,081,779 Interest rate derivative instruments Outflows 26,611 99,722 35,122 211,063 881,440 1,253,958 Inflows 26,611 99,722 35,122 211,063 881,440 1,253,958 Total outflows $ 42,426,360 $ 38,247,109 $ 34,937,482 $ 39,494,408 $ 2,295,657 $ 157,401,016 Total inflows $ 42,484,815 $ 38,286,013 $ 34,972,859 $ 39,559,824 $ 2,294,518 $ 157,598,029 Net flows $ 58,455 $ 38,904 $ 35,377 $ 65,416 $ (1,139) $ 197,013

93

- 71 - January 1, 2012 Item 0-30 Days 31-90 Days 91-180 Days 181 Days - 1 Year Over 1 Year Total Foreign currency derivative instruments Outflows $ 58,711,163 $ 40,509,715 $ 42,961,262 $ 11,284,645 $ - $ 153,466,785 Inflows 58,209,659 40,290,930 42,239,394 11,341,796 - 152,081,779 Interest rate derivative instruments Outflows - - 29,828 198,322 296,150 524,300 Inflows - - 29,828 198,322 296,150 524,300 Total outflows $ 58,711,163 $ 40,509,715 $ 42,991,090 $ 11,482,967 $ 296,150 $ 153,991,085 Total inflows $ 58,209,659 $ 40,290,930 $ 42,269,222 $ 11,540,118 $ 296,150 $ 152,606,079 Net flows $ (501,504) $ (218,785) $ (721,868) $ 57,151 $ - $ (1,385,006)

3) Maturity analysis of off-balance-sheet items

December 31, 2013 Item 181 Days - 0-30 Days 31-90 Days 91-180 Days Over 1 Year Total 1 Year Developed and irrevocable loan commitments $ - $ - $ - $ - $ - $ - Irrevocable credit 26,233 458,873 983,574 5,848,719 85,821,640 93,139,039 Letters of credit 2,244,234 4,340,450 715,493 20,258 - 7,320,435 Guarantees 1,793,040 2,532,764 1,179,907 4,247,223 6,937,350 16,690,284 Total $ 4,063,507 $ 7,332,087 $ 2,878,974 $ 10,116,200 $ 92,758,990 $ 117,149,758

December 31, 2012 Item 181 Days - 0-30 Days 31-90 Days 91-180 Days Over 1 Year Total 1 Year Developed and irrevocable loan commitments $ - $ - $ - $ 58,272 $ 249,113 $ 307,385 Irrevocable credit 202,205 1,286,136 4,765,710 9,486,270 73,540,514 89,280,835 Letters of credit 1,946,397 4,461,554 850,363 1,013 - 7,259,327 Guarantees 714,225 1,299,290 1,408,447 2,401,922 7,079,993 12,903,877 Total $ 2,862,827 $ 7,046,980 $ 7,024,520 $ 11,947,477 $ 80,869,620 $ 109,751,424

January 1, 2012 Item 181 Days - 0-30 Days 31-90 Days 91-180 Days Over 1 Year Total 1 Year Developed and irrevocable loan commitments $ - $ - $ - $ 792,592 $ - $ 792,592 Irrevocable credit 91,558 613,203 2,507,252 11,994,659 70,907,351 86,114,023 Letters of credit 1,703,330 3,271,246 536,451 68,619 - 5,579,646 Guarantees 1,210,944 1,055,205 717,671 1,716,090 6,336,824 11,036,734 Total $ 3,005,832 $ 4,939,654 $ 3,761,374 $ 14,571,960 $ 77,244,175 $ 103,522,995

e. Cash flow and fair value risk of interest rate fluctuation

The floating-rate assets/liabilities held by the Bank may take risks of future cash inflow/outflow. The risk is considered substantial, therefore hedged by the Bank.

Fair value input levels

Fair Value Measurement of December 31, 2013 Financial Instruments Total Level 1 Level 2 Level 3

Non-derivative financial instruments

Assets Financial assets at fair value through profit or loss Bond investments $ 439,056 $ 439,056 $ - $ - Others 14,277,331 14,277,331 - - Available-for-sale financial assets Stock investments 1,685,705 1,361,841 323,864 -

94 (Continued)

- 72 - Fair Value Measurement of December 31, 2013 Financial Instruments Total Level 1 Level 2 Level 3

Bond investments $ 35,266,662 $ 35,266,662 $ - $ - Others 2,016,123 2,016,123 - -

Derivative financial instruments

Assets Financial assets at fair value through profit or loss 4,795,759 - 4,653,433 142,326 Liabilities Financial liabilities at fair value through profit or loss 3,464,639 - 3,464,639 -

$ 61,945,275 $ 53,361,013 $ 8,441,936 $ 142,326 (Concluded)

Changes in Level 3 financial assets were as follows: (In Thousands of New Taiwan Dollars)

Beginning Valuation Increase Decrease Ending Item Balance Gains (Losses) Buy or Issue Transfer in Sell, Disposal Transfer Out Balance Financial assets at fair value through profit or loss Derivative $ 123,830 $ 18,496 $ - $ - $ - $ - $ 142,326 Total $ 123,830 $ 18,496 $ - $ - $ - $ - $ 142,326

Fair Value Measurement of December 31, 2012 Financial Instruments Total Level 1 Level 2 Level 3

Non-derivative financial instruments

Assets Financial assets at fair value through profit or loss Bond investments $ 687,764 $ 687,764 $ - $ - Others 290,224 290,224 - - Available-for-sale financial assets Stock investments 2,283,584 1,894,147 389,437 - Bond investments 24,035,296 24,035,296 - - Others 1,847,801 1,847,801 - -

Derivative financial instruments

Assets Financial assets at fair value through profit or loss 2,501,461 - 2,377,631 123,830 Liabilities Financial liabilities at fair value through profit or loss 1,245,021 - 1,245,021 -

$ 32,891,151 $ 28,755,232 $ 4,012,089 $ 123,830 95 - 73 - Changes in Level 3 financial assets were as follows:

(In Thousands of New Taiwan Dollars)

Beginning Valuation Increase Decrease Ending Item Balance Gains (Losses) Buy or Issue Transfer in Sell, Disposal Transfer Out Balance Financial assets at fair value through profit or loss Derivative $ 120,995 $ 2,835 $ - $ - $ - $ - $ 123,830 Total $ 120,995 $ 2,835 $ - $ - $ - $ - $ 123,830

Fair Value Measurement of January 1, 2012 Financial Instruments Total Level 1 Level 2 Level 3

Non-derivative financial instruments

Assets Financial assets at fair value through profit or loss Bond investments $ 1,085,266 $ 1,085,266 $ - $ - Others 582,707 582,707 - - Available-for-sale financial assets Stock investments 2,116,982 1,880,193 236,789 - Bond investments 19,532,232 19,532,232 - - Others 2,595,837 2,595,837 - -

Derivative financial instruments

Assets Financial assets at fair value through profit or loss 3,531,026 - 3,410,031 120,995 Liabilities Financial liabilities at fair value through profit or loss 2,274,883 - 2,274,883 -

$ 31,718,933 $ 25,676,235 $ 5,921,703 $ 120,995

Changes in Level 3 financial assets were as follows:

(In Thousands of New Taiwan Dollars)

Beginning Valuation Increase Decrease Ending Item Balance Gains (Losses) Buy or Issue Transfer in Sell, Disposal Transfer Out Balance Financial assets at fair value through profit or loss Derivative $ 289,823 $ (28,727) $ 152,530 $ - $ 292,631 $ - $ 120,995 Total $ 289,823 $ (28,727) $ 152,530 $ - $ 292,631 $ - $ 120,995

96

- 74 - Information of Reclassifications

Since July 1, 2008, the Bank adopted the newly amended SFAS No. 34, “Financial Instruments: Recognition and Measurement”. The amendments to SFAS 34 mainly deal with reclassifications of financial assets at fair value through profit or loss held for trading. The fair values were as follows:

Before After Reclassification Reclassification

Financial assets held for trading $ 3,498,350 $ 3,034,435 Available-for-sale financial assets 20,794,295 21,258,210

$ 24,292,645 $ 24,292,645

In 2008, the international economic condition changed dramatically and a global financial crisis took place caused the value of financial assets to collapse. The Bank decided not to sell parts of the financial assets held for trading in the short time, and reclassified them to available-for-sale financial assets

The carrying value and fair value after reclassification as of December 31, 2013, were as follows:

Carrying Value Fair value

Available-for-sale financial assets $ 59,517 $ 59,517

The investment income and stockholder’s equity adjustment recognized on the reclassified financial assets and the pro forma information if the reclassification had not been made were as follows:

Pro Forma Carrying Value Information Investment Stockholder’s Investment Income Equity Income Recognized Adjustment Recognized

Available-for-sale financial assets $ - $ 2,949 $ 2,949

34. RISK CONTROL AND HEDGE STRATEGY

The activities of risk control and hedge strategy of the Bank are affected by the customer-oriented nature of the banking industry and the restrictions of law. In order to adopt this circumstance, an all-round thus total risk management and control system has been implemented to recognize measure and control all the risks of the Bank.

The market risk management objective is to hold the best risk position, maintain adequate liquidity and concentrate to manage all of the market risks by thoroughly having those factors including economic environment, competitive situation, market value risk and the influence to net interest revenue into consideration; therefore, to avoid net cash flow and market value risks, cash flow hedge and fair value hedge are the main hedge strategy of the Bank.

To hedge interest rate risk, a great part of the Bank’s financial instruments are fixed-interest-rate instruments. The Bank also transferred the transaction linking to monetary market to that with fixed rate. Interest rate swap contracts are the prime hedging instruments against interest rate fluctuations. In addition, cross currency swaps, swap options, interest rate caps and floors, and other derivatives may be used by the Bank as hedging instruments.

97

- 75 - 35. INFORMATION ABOUT THE BANK

Asset Quality

(In Thousands of New Taiwan Dollars, %)

December 31, 2013 Items Coverage Nonperforming NPL Ratio Loan Loss Category Total Loan Ratio Loan (Note 1) (Note 2) Reserve (Note 3) Secured $ 1,017,123 $ 129,694,747 0.78 $ 986,899 97.03 Corporate loans Unsecured 303,519 115,114,031 0.26 2,154,397 709.81 Mortgage (Note 4) 98,786 91,505,499 0.11 483,841 489.78 Cash card - 7,558 - 4,038 - Consumer loans Micro credit (Note 5) 144,236 26,615,743 0.54 835,842 579.50 Secured 273,735 85,820,790 0.32 481,810 176.01 Other (Note 6) Unsecured 68,731 791,017 8.69 115,233 167.66 Loans 1,906,130 449,549,385 0.42 5,062,060 265.57

(In Thousands of New Taiwan Dollars, %)

December 31, 2012 Items Coverage Nonperforming NPL Ratio Loan Loss Category Total Loan Ratio Loan (Note 1) (Note 2) Reserve (Note 3) Secured $ 868,258 $ 120,496,400 0.72 $ 1,507,069 173.57 Corporate loans Unsecured 449,363 116,271,211 0.39 1,303,004 289.97 Mortgage (Note 4) 109,306 83,871,059 0.13 434,670 397.66 Cash card 8 10,456 0.07 5,219 65,237.50 Consumer loans Micro credit (Note 5) 202,590 25,131,795 0.81 803,550 396.64 Secured 297,792 79,205,965 0.38 435,416 146.21 Other (Note 6) Unsecured 12,199 816,679 1.49 23,427 192.04 Loans 1,939,516 425,803,565 0.46 4,512,355 232.65

Items December 31, 2013 Overdue Account Delinquency Allow for Credit Coverage Category Receivable Receivable Ratio Losses Ratio Credit card $ 13,329 $ 8,088,054 0.16% $ 51,974 389.93% Account receivable without recourse (Note 7) 32,981 279,702 11.79% 32,981 100.00%

Items December 31, 2012 Overdue Account Delinquency Allow for Credit Coverage Category Receivable Receivable Ratio Losses Ratio Credit card $ 19,102 $ 7,758,490 0.25% $ 59,544 311.71% Account receivable without recourse (Note 7) 32,981 764,530 4.31% 32,981 100.00%

Non-reportable overdue loans and receivable

December 31, 2013 December 31, 2012 Non-reportable Non-reportable Non-Reportable Overdue Non-Reportable Overdue NPL Balance Receivable NPL Balance Receivable Balance Balance Non-reportable amount upon performance of debt negotiation program (Note 8) $ 84,291 $ 348,327 $ 115,300 $ 445,321 Amount received from performance of debt negotiation program (Note 9) 235,668 385,126 240,786 397,066 Total 319,959 733,453 356,086 842,387

Note 1: The amount recognized as non-performing loans (NPLs) is in compliance with the “Regulations Governing the Procedures for Banking Institutions to Evaluate Assets and Deal with Non-performing/Non-accrual Loans.” Nonperforming credit loans represent the amounts of nonperforming loans reported to the FSC, as required by the FSC in its letter dated July 6, 2005 98 (Ref. No. 094400378).

- 76 - Note 2: Nonperforming loan ratio = Nonperforming loans ÷ Outstanding loan balance; Nonperforming credit loan ratio = Nonperforming loans ÷ Accounts receivable balance.

Note 3: Allowance for doubtful accounts ratio = Allowance for doubtful accounts in loans ÷ Overdue loans; Allowance for doubtful accounts ratio of credit card = Allowance for doubtful accounts in credit cards ÷ Overdue loans.

Note 4: Home mortgage refer to financing obtained to buy, build, or fix houses owned by the borrowers’ spouse or children, with the house used as loan collateral.

Note 5: Micro credit is covered by the FSC pronouncement dated December 19, 2005 (Ref No. 09440010950) and is excluded from credit card and cash card loans.

Note 6: “Others” under consumer loans refers to secured or unsecured loans other than mortgage loans, cash cards, micro credit, and credit cards.

Note 7: As required by the FSC in its letter dated July 19, 2005 (Ref No. 094000494), provision for bad debt is recognized once no compensation is made by a factor or insurance company for accounts receivable factored without recourse.

Note 8: Accounts under “loans not required to be classified as NPL upon performance of a debt negotiation program” and “accounts receivable not required to be classified as overdue receivable upon debt negotiation program” were processed according the FSC pronouncement dated April 25, 2006 (Ref No. 09510001270).

Note 9: Accounts under “loans not required to be classified as NPL upon performance of a debt discharge program and rehabilitation program” and “accounts receivable not required to be classified as overdue receivable upon debt discharge program and rehabilitation program” were processed according the FSC pronouncement dated September 15, 2008 (Ref No. 09700318940).

Concentration of Credit Extensions

(In Thousands of New Taiwan Dollars, %)

December 31, 2013 Top 10 Total Credit Percentage of Group (Note 2) Rank (Note 1) (Note 3) Net Worth (%) 1 Group A (016700 real estate development activities) $ 2,431,286 6.64 2 Group B (015010 ocean transportation) 2,079,595 5.68 3 Group C (016700 real estate development activities) 1,952,400 5.33 4 Group D (014615 wholesale of metal construction 1,756,324 4.79 materials) 5 Group E (012641 manufacture of liquid crystal panel 1,624,724 4.44 and components) 6 Group F (015590 other accommodation) 1,569,782 4.29 7 Group G (016499 unclassified other financial 1,491,938 4.07 agencies) 8 Group H (14641 computers and peripheral 1,445,682 3.95 equipments - software wholesale) 9 Group I (016700 real estate development activities) 1,374,500 3.75 10 Group J (014719 other retail sale in non-specialized 1,334,524 3.64 stores)

99

- 77 - (In Thousands of New Taiwan Dollars, %)

December 31, 2012 Top 10 Total Credit Percentage of Group (Note 2) Rank (Note 1) (Note 3) Net Worth (%) 1 Group A (016700 real estate development activities) $ 2,422,000 7.67 2 Group K (011302 manufacture of footwear) 2,267,978 7.19 3 Group B (015010 ocean transportation) 2,250,645 7.13 4 Group D (014615 wholesale of metal construction 1,821,063 5.77 materials) 5 Group F (015590 other accommodation) 1,712,401 5.43 6 Group L (012101 manufacture of tires) 1,602,480 5.08 7 Group H (014641 computers and peripheral 1,569,171 4.97 equipments - software wholesale) 8 Group G (016811 real estate rental activities) 1,440,788 4.57 9 Group I (016700 real estate development activities) 1,369,739 4.34 10 Group M (014719 other retail Sale in 1,334,173 4.23 non-specialized stores)

Note 1: The ranking is arranged in descending order of outstanding loan balance, excluding all the government entities and nation-owned enterprises. If the borrower is a member company of a group then the disclosed amount will be the total granted loan amount of that entire group.

Note 2: According to Article 6 of the “Supplementary Provisions to the Stock Exchange Corporation Criteria for the Review of Securities Listings”, “Group” refers to the entity that has a controlling or subordinate relationship with the counter-party that obtained loans from the Bank.

Note 3: Credit balance means the sum of all the loan (including import bill negotiated, discounted export bills negotiated, overdrafts, short-term secured and unsecured loans, marginal receivables, medium-term secured and unsecured loans, long-term secured and unsecured loans and overdue receivables), exchange bills negotiated, accounts receivable factored without recourse, acceptances receivable, and guarantees issued.

Interest Rate Sensitivity Information

Interest Rate Sensitivity December 31, 2013

(In Thousands of New Taiwan Dollars, %)

181 Days to Item 1 to 90 Days 91 to 180 Days Over One Year Total One Year Interest-sensitive assets $ 415,572,242 $ 18,455,533 $ 16,923,986 $ 73,166,062 $ 524,117,823 Interest-sensitive liabilities 209,819,483 242,293,597 63,166,943 21,688,013 536,968,036 Interest sensitivity gap 205,752,759 (223,838,064) (46,242,957) 51,478,049 (12,850,213) Net equity 36,629,704 Ratio of interest-sensitive assets to liabilities 97.61 Ratio of interest sensitivity gap to net equity (35.08)

December 31, 2012 (In Thousands of New Taiwan Dollars, %)

181 Days to Item 1 to 90 Days 91 to 180 Days Over One Year Total One Year Interest-sensitive assets $ 409,653,407 $ 19,478,232 $ 14,506,744 $ 72,627,206 $ 516,265,589 Interest-sensitive liabilities 201,729,502 219,856,308 64,782,499 21,899,640 508,267,949 Interest sensitivity gap 207,923,905 (200,378,076) (50,275,755) 50,727,566 7,997,640 Net equity 31,560,949 Ratio of interest-sensitive assets to liabilities 101.57 Ratio of interest sensitivity gap to net equity 25.34

100

- 78 - Note 1: The above amounts included only New Taiwan dollar amounts held by the head office and branches of the Bank (i.e., excluding foreign currency).

Note 2: Interest rate-sensitive assets and liabilities mean the revenues or costs of interest-earning assets and interest-bearing liabilities affected by interest rate changes.

Note 3: Interest rate sensitivity gap = Interest rate-sensitive assets - Interest rate-sensitive liabilities.

Note 4: Ratio of interest rate-sensitive assets to liabilities = Interest rate-sensitive assets ÷ Interest rate-sensitive liabilities (in New Taiwan dollars).

Interest Rate Sensitivity December 31, 2013

(In Thousands of U.S. Dollars, %)

181 Days to Item 1 to 90 Days 91 to 180 Days Over One Year Total One Year Interest-sensitive assets $ 1,149,298 $ 511,904 $ 195,156 $ 942,146 $ 2,798,504 Interest-sensitive liabilities 2,085,267 155,508 207,195 25,461 2,473,431 Interest sensitivity gap (935,969) 356,396 (12,039) 916,685 325,073 Net equity 1,223,029 Ratio of interest-sensitive assets to liabilities 113.14 Ratio of interest sensitivity gap to net equity 26.58

December 31, 2012

(In Thousands of U.S. Dollars, %)

181 Days to Item 1 to 90 Days 91 to 180 Days Over One Year Total One Year Interest-sensitive assets $ 1,143,601 $ 446,535 $ 110,695 $ 647,423 $ 2,348,254 Interest-sensitive liabilities 1,946,957 160,617 162,118 16,001 2,285,693 Interest sensitivity gap (803,356) 285,918 (51,423) 631,422 62,561 Net equity 1,083,080 Ratio of interest-sensitive assets to liabilities 102.74 Ratio of interest sensitivity gap to net equity 5.78

Note 1: The above amounts included only U.S. dollar amounts held by the head office, domestic branches, OBU and overseas branches of the Bank and excluded contingent assets and contingent liabilities.

Note 2: Interest rate-sensitive assets and liabilities mean the revenues or costs of interest-earning assets and interest-bearing liabilities affected by interest rate changes.

Note 3: Interest rate sensitivity gap = Interest rate-sensitive assets - Interest rate-sensitive liabilities.

Note 4: Ratio of interest rate-sensitive assets to liabilities = Interest rate-sensitive assets ÷ Interest rate-sensitive liabilities (in U.S. dollars)

Profitability (%)

For the Year Ended December 31 Item 2013 2012 Pretax 0.71 0.81 Return on total assets After tax 0.61 0.72 Pretax 13.84 16.39 Return on net equity After tax 11.91 14.54 Profit margin 33.02 37.29

101

- 79 - Note 1: Return on total assets = Income before (after) income tax ÷ Average total assets

Note 2: Return on equity = Income before (after) income tax ÷ Average equity

Note 3: Net income ratio = Income after income tax ÷ Total net revenues

Note 4: Income before (after) income tax represents income for the years ended December 31, 2013 and 2012.

Maturity Analysis

Maturity Analysis of Assets and Liabilities December 31, 2013 (In Thousands of New Taiwan Dollars)

Period Remaining until Due Date and Amount Due Total 181 Days - More Than 0-10 Days 11-30 Days 31-90 Days 91-180 Days 1 Year 1 Year Main capital inflow on maturity $ 670,203,072 $ 94,994,651 $ 73,795,658 $ 75,201,738 $ 67,051,118 $ 53,031,779 $ 306,128,128 Main capital outflow on maturity 839,627,543 47,236,168 71,332,259 122,348,745 116,743,220 137,940,918 344,026,233 Gap (169,424,471) 47,758,483 2,463,399 (47,147,007) (49,692,102) (84,909,139) 37,898,105

December 31, 2012

(In Thousands of New Taiwan Dollars)

Period Remaining until Due Date and Amount Due Total 181 Days - More Than 0-10 Days 11-30 Days 31-90 Days 91-180 Days 1 Year 1 Year Main capital inflow on maturity $ 628,780,094 $ 85,590,521 $ 77,032,957 $ 66,645,490 $ 51,079,278 $ 65,390,737 $ 283,041,111 Main capital outflow on maturity 777,703,205 44,304,450 64,754,466 114,937,264 118,312,023 183,280,620 252,114,382 Gap (148,923,111) 41,286,071 12,278,491 (48,291,774) (67,232,745) (117,889,883) 30,926,729

Note: The above amounts included only New Taiwan dollar amounts held by the head office and domestic branches of the Bank (i.e., excluding foreign currency).

Maturity Analysis of Assets and Liabilities December 31, 2013 (In Thousands of U.S. Dollars)

Remaining Period to Maturity Total 181 Days - 0-30 Days 31-90 Days 91-180 Days Over 1 Year 1 Year Main capital inflow on maturity $ 6,190,015 $ 1,502,984 $ 1,871,744 $ 1,487,734 $ 256,022 $ 1,071,531 Main capital outflow on maturity 7,561,306 2,835,934 2,177,303 1,406,332 984,464 157,273 Gap (1,371,291) (1,332,950) (305,559) 81,402 (728,442) 914,258

December 31, 2012

(In Thousands of U.S. Dollars)

Remaining Period to Maturity Total 181 Days - 0-30 Days 31-90 Days 91-180 Days Over 1 Year 1 Year Main capital inflow on maturity $ 5,059,855 $ 1,905,193 $ 1,041,941 $ 828,116 $ 551,892 $ 732,713 Main capital outflow on maturity 6,129,150 2,352,322 1,291,667 982,302 1,299,693 203,166 102 Gap (1,069,295) (447,129) (249,726) (154,186) (747,801) 529,547

- 80 - Note: The above amounts included only U.S. dollar amounts held by the head office, domestic branches, OBU and overseas branches of the Bank and excluded contingent assets and contingent liabilities.

36. CAPITAL MANAGEMENT

a. Capital management target and procedure

Purpose of capital management is to reach criteria set by administration, implement capital management procedure, and upgrade capital perform efficiency to reach maximum of organization purpose.

b. Capital definition and standard

The administration of the Bank is Financial Supervisory Commission, and follows principles of capital adequacy management.

c. Self-owned capital

Self-owned capital of the Bank is divided into Tier I capital and Tier II capital according to principles of capital adequacy management.

37. CAPITAL ADEQUACY RATIO

Year December 31 2013 Items Common stockholders’ equity $ 33,794,269 Other Tier 1 capital 2,590,685 Eligible capital Tier 2 capital 11,458,097 Eligible capital 47,843,051 Standard valuation method 427,656,086 Internal valuation method - Credit risk Credit appraisal adjustment risk 3,743,975 REIT’s 171,614 Basic index method - Risk-weighted assets Operational risk Selective standard method 15,824,213 Advanced valuation method - Standard method 2,173,488 Market risk Internal model method - Total risk-weighted assets 449,569,376 Capital adequacy 10.64 Ratio of common stock equity to risk-weighted assets 7.52 Ratio of Tier 1 capital to risk-weighted assets 8.09 Leverage ratio 4.94

Note 1: The above table was filled in accordance with the regulations Governing the Capital Adequacy Ratio of Banks and related calculation tables.

Note 2: Formula:

a. Self-owned capital = Common equity Tier I + Other Tier I capital + Tier II capital

b. Risk-weighted assets = Credit risk-weighted assets + (Operation risk capital + Market price risk capital) x 12.5 103

- 81 - c. Capital adequacy = Self-owned capital/Risk-weighted assets

d. Common equity Tier I capital to risk-weighted assets ratio = Common equity Tier I capital/Risk-weighted assets

e. Tier I capital to risk-weighted assets ratio = (Common equity Tier I + Other Tier I capital)/Risk-weighted assets

f. Leverage ratio = Tier I capital/Adjusted average assets

Year December 31, 2012 Items Tier 1 capital $ 31,604,015 Tier 2 capital 13,953,783 Eligible capital Tier 3 capital - Eligible capital 45,557,798 Standard valuation method 389,259,853 Credit risk Internal valuation method - REIT’s 167,370 Basic index method - Risk-weighted assets Operational risk Selective standard method 13,722,125 Advanced valuation method - Standard method 4,366,525 Market risk Internal model method - Total risk weighted assets 407,515,873 Capital adequacy 11.18 Ratio of Tier 1 capital to risk-weighted assets 7.76 Ratio of Tier 2 capital to risk-weighted assets 3.42 Ratio of Tier 3 capital to risk-weighted assets - Ratio of common stockholder’s equity to total assets 3.50 Leverage ratio 5.30

Note 1: The above table was filled in accordance with the regulations Governing the Capital Adequacy Ratio of Banks and related calculation tables.

Note 2: The Bank should disclose the capital adequacy ratios of the current and previous periods in annual financial reports. For semiannual financial reports, the Bank should disclose the capital adequacy ratios of the current and previous periods and of the previous year-end.

Note 3: The formulas used in calculations the above table entries were as follows:

1) Eligible capital = Tier 1 capital + Tier 2 capital + Tier 3 capital.

2) Total risk-weighted asset = Risk-weighted assets for credit risk + (Capital requirement for marker risk + Capital requirements for market risk) × 12.5

3) Capital adequacy ratio = Eligible capital ÷ Total risk-weighted assets.

4) Tier 1 risk-based capital ratio = Tier 1 capital ÷ Total risk-weighted assets.

5) Tier 2 risk-based capital ratio = Tier 2 capital ÷ Total risk-weighted assets.

6) Tier 3 risk-based capital ratio = Tier 3 capital ÷ Total risk-weighted assets. 104

- 82 - 7) Ratios of common stockholder’s capital to total assets = common stock ÷ Total assets.

8) Leverage ratio = Tier 1 capital ÷ Adjusted average assets (average assets subtract deduction items in Tier 1 capital such as goodwill, NPL unamortized loses and all deduction items in Tier 1 capital defined by the regulations governing the capital adequacy ratio of banks and related calculation tables.)

38. EXCHANGE RATE INFORMATION OF FOREIGN-CURRENCY FINANCIAL ASSETS AND LIABILITIES

(Foreign Currencies/In Thousands of New Taiwan Dollars)

December 31 2013 2012 Foreign Exchange New Taiwan Foreign Exchange New Taiwan Currencies Rate Dollars Currencies Rate Dollars

Financial assets

Monetary items USD $ 2,192,257 29.95 $ 65,658,104 $ 1,987,731 29.14 $ 57,914,536 EUR 19,230 41.29 794,002 15,630 38.61 603,476 JPY 3,216,642 0.29 917,596 3,131,701 0.34 1,057,058 AUD 10,917 26.71 291,623 14,857 30.27 449,756 HKD 126,918 3.86 490,238 193,940 3.76 728,944 GBP 1,453 49.50 71,907 3,146 46.98 147,768 ZAR 21,463 2.86 61,456 305,454 3.43 1,047,482 NZD 4,356 24.60 107,155 8,036 23.93 192,314 CAD 696 28.13 19,592 3,932 29.3 115,203 RMB 2,222,919 4.95 10,998,363 290,448 4.68 1,358,084 Nonmonetary items USD 933,145 29.95 27,947,692 294,090 29.14 8,568,618 EUR 2 41.29 81 11,146 38.61 430,344 JPY 9 0.29 3 581,309 0.34 196,212 AUD 117,341 26.71 3,134,473 101,960 30.27 3,086,571 ZAR 842,473 2.86 2,412,245 104,232 3.43 357,439 RMB 260,139 4.95 1,287,095 36,708 4.68 171,638

Financial liabilities

Monetary items USD 2,432,394 29.95 72,850,204 2,146,317 29.14 62,535,096 EUR 27,596 41.29 1,139,417 23,293 38.61 899,374 JPY 3,983,109 0.29 1,136,243 1,548,752 0.34 522,758 AUD 121,264 26.71 3,239,260 39,173 30.27 1,185,871 HKD 300,858 3.86 1,162,100 277,623 3.76 1,043,475 GBP 9,322 49.50 461,503 2,796 46.98 131,366 ZAR 485,387 2.86 1,389,803 482,049 3.43 1,653,070 NZD 5,571 24.60 137,042 8,068 23.93 193,095 CAD 7,423 28.13 208,823 4,468 29.3 130,906 RMB 2,626,180 4.95 12,993,585 313,195 4.68 1,464,445 Nonmonetary items USD 517,110 29.95 15,487,447 37,377 29.14 1,089,028 EUR 502 41.29 20,725 10,373 38.61 400,514 JPY 9 0.29 3 396,694 0.34 133,898 AUD 345 26.71 9,220 42,956 30.27 1,300,388 ZAR 135,874 2.86 389,048 - 3.43 -

105

- 83 - 39. ALLOCATION OF REVENUE, COST, EXPENSE AND NET INCOME IN THE INTERCOMPANY TRANSACTIONS

SKFHC and its subsidiaries apply economies of scale to optimize profit. The joint marketing expenses are allocated to each subsidiary’s stock capital.

40. INFORMATION RELATED TO SIGNIFICANT TRANSACTIONS

The related information of significant transactions is as follows:

No. Item Explanation 1 Accumulated Purchases and sales balance of specific investee’s marketable None security over NT$300 million or 10% of outstanding capital for the year ended December 31, 2013 2 Acquisition of real assets over NT$300 million or 10% of outstanding capital None for the year ended December 31, 2013 3 Disposal of real assets over NT$300 million or 10% outstanding capital for the None year ended December 31, 2013 4 Discount on fees income from related parties over NT$5 million None 5 Receivables from related parties over NT$300 million or 10% of outstanding None capital 6 Sale of NPL information. None 7 Financial assets securitization or real assets securitization None 8 Other significant transactions which may affect decisions of the users of the None financial statement

The related information of the Bank’s investees:

No. Item Explanation 1 Information on invested enterprise. None 2 Capital lending to another party None 3 Endorsement for another party None 4 Marketable securities held as of December 31, 2013 None 5 Accumulated purchases and sales balance of specific marketable security over None NT$300 million or 10% of outstanding capital for the year ended December 31, 2013 6 Acquisition of property, plant and equipment over NT$300 million or 10% of None outstanding capital for the year ended December 31, 2013 7 Disposal of property, plant and equipment over NT$300 million or 10% of None outstanding capital for the year ended December 31, 2013 8 Discount on fees income from related parties over NT$5 million None 9 Receivable from related parties over NT$300 million or 10% of outstanding None capital 10 Sale of NPL over NT$5 billion None 11 Financial assets securitization or real assets securitization None 12 Derivative instrument None 13 Other significant transactions which may affect decisions of the users of the None financial statement

Note: Not applicable or not required for disclosure if the investee is a financial institution, insurance company, or security company.

Investment in Mainland China: None. 106

- 84 - Intercompany relationships and significant intercompany transactions: Appendix.

41. OPERATING SEGMENT FINANCIAL INFORMATION

Information reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance focuses on types of goods or services delivered or provided. The Bank’s reportable segments under are therefore as follows:

a. Segment revenues and results

The analysis of the Bank’s revenue and results from continuing operations by reportable segment was as follows:

For the Year Ended December 31, 2013 Commercial Personal Others Total

Interest revenue $ 2,827,742 $ 5,272,590 $ 297,441 $ 8,397,773 Net income excluding interest revenue (319,207) 2,109,998 2,252,148 4,042,939 Net revenue 2,508,535 7,382,588 2,549,589 12,440,712 Bad debt provision (822,672) (350,885) 6,663 (1,166,894) Operating expense (1,176,200) (4,144,308) (1,205,127) (6,525,635)

Income before income tax $ 509,663 $ 2,887,395 $ 1,351,125 $ 4,748,183

For the Year Ended December 31, 2012 Commercial Personal Others Total

Interest revenue $ 2,550,595 $ 5,513,406 $ (475,814) $ 7,588,187 Net income excluding interest revenue (225,793) 1,711,033 2,564,162 4,049,402 Net revenue 2,324,802 7,224,439 2,088,348 11,637,589 Bad debt provision (530,688) (187,264) 17,092 (700,860) Operating expense (1,045,668) (3,928,460) (1,106,805) (6,080,933)

Income before income tax $ 748,446 $ 3,108,715 $ 998,635 $ 4,855,796

Segment revenue reported above represents revenue generated from external customers. There were no inter-segment sales during the years ended December 31, 2013 and 2012.

b. Segment assets December 31 2013 2012

Segment assets

Commercial $ 244,151,061 $ 236,421,755 Personal 223,119,621 209,642,409 Others 225,973,274 187,750,700

Total assets $ 693,243,956 $ 633,814,864

107

- 85 - 42. FIRST-TIME ADOPTION OF IFRSs

a. Basis of the preparation of financial information under IFRSs

The Bank’s consolidated financial statements for the year ended December 31, 2013 were the first IFRS financial statements. The Group not only follows the significant accounting policies stated in Note 5 but also applies the requirements under FSC recognized IFRS 1 “First-time Adoption of IFRS” as the basis for the preparation.

b. Effects of transition to IFRSs

The effects of the transition to IFRSs on the Bank’s consolidated balance sheets, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated statements of cash flows are stated as follows:

1) The reconciliation of consolidated balance sheet as of January 1, 2012

Change to IFRSs Difference in ROC GAAP Recognition and Difference in IFRSs Item Amount Measurement Presentation Amount Item Notes

Assets Assets

Cash and cash equivalents $ 10,320,038 $ - $ - $ 10,320,038 Cash and cash equivalents Due from Central Bank of 110,495,816 - - 110,495,816 Due from Central Bank of China and banks China and banks Financial assets at fair value 5,198,999 - - 5,198,999 Financial asset at fair value through profit or loss through profit or loss Receivables, net 22,023,133 - (1,148,551) 20,874,582 Receivables, net n) - - 1,148,551 1,148,551 Income tax assets, current n) Notes discounted and loans, net 371,035,016 - - 371,035,016 Notes discounted and loans, net Available-for-sale financial 24,245,051 - - 24,245,051 Available-for-sale financial assets assets Held-to-maturity investments 3,513,154 - - 3,513,154 Held-to-maturity investments Other financial assets, net 4,301,570 - - 4,301,570 Other financial assets, net Properties and equipments 6,005,876 - 1,074,307 7,080,183 Properties and equipments a), m) Goodwill and intangible assets 1,503,808 - (154,407) 1,349,401 Goodwill and intangible assets m) Other assets 2,664,863 22,890 (1,563,400) 1,124,353 Other assets a), b), c), d), k) - - 765,919 765,919 Deferred income assets b), d), k)

Total $ 561,307,324 $ 22,890 $ 122,419 $ 561,452,633 Total

Liabilities Liabilities

Due to Central Bank of China $ 7,842,865 $ - $ - $ 7,842,865 Due to Central Bank of China and banks and banks Financial liabilities at fair value 2,274,883 - - 2,274,883 Financial liabilities at fair value through profit or loss through profit or loss Notes issued under repurchase 3,823,256 - - 3,823,256 Notes issued under repurchase agreements agreements Payables 15,926,999 (38,151) (16,752) 15,872,096 Payables b), h), n) - - 16,752 16,752 Income tax liabilities, current n) Customer deposits and 481,805,377 - - 481,805,377 Customer deposits and remittances remittances Financial debentures 19,800,000 - - 19,800,000 Financial debentures Accrued pension liability 131,989 215,666 15,346 363,001 Provision c), d) Other financial liabilities 1,269,906 - - 1,269,906 Other financial liabilities Other liabilities 867,570 75,410 (237,716) 705,264 Other liabilities f), h) - - 344,789 344,789 Deferred income tax liabilities f), k) Total liabilities 533,742,845 252,925 122,419 534,118,189 Total liabilities

Shareholder’s equity Equity

Capital stock Capital stock Common stock 20,512,780 - - 20,512,780 Common stock Capital surplus Capital surplus Premium on capital stock 365,754 - - 365,754 Premium on capital stock Retained earnings - Retained earnings Legal reserve 1,264,655 - - 1,264,655 Legal reserve Special reserve 60,508 - - 60,508 Special reserve Unappropriated retained 4,570,475 (39,790) - 4,530,685 Unappropriated retained b), d), e), f), g), h) earnings earnings Other adjustments on Other equity stockholder’s equity Unrealized revaluation 234,631 (234,631) - - f) increment Cumulative translation 18,160 (18,160) - - Exchange differences on g) adjustments translation of foreign operations Unrealized gain from 622,447 (22,385) - 600,062 Unrealized gain from e) available-for-sale financial available-for-sale financial assets assets Net loss not recognized as (84,931) 84,931 - - c) pension cost Total stockholder’s equity 27,564,479 (230,035) - 27,334,444 Total equity

Total $ 561,307,324 $ 22,890 $ 122,419 $ 561,452,633 Total 108

- 86 - 2) The reconciliation of consolidated balance sheet as of December 31, 2012

Change to IFRSs Difference in ROC GAAP Recognition and Difference in IFRSs Item Amount Measurement Presentation Amount Item Notes

Assets Assets

Cash and cash equivalents $ 16,525,167 $ - $ - $ 16,525,167 Cash and cash equivalents Due from Central Bank of 129,336,837 - - 129,336,837 Due from Central Bank of China and banks China and banks Financial assets at fair value 3,479,449 - - 3,479,449 Financial asset at fair value through profit or loss through profit or loss Receivables, net 16,587,863 - (383,609) 16,204,254 Receivables, net n) - - 383,609 383,609 Income tax assets, current n) Notes discounted and loans, net 421,358,813 - - 421,358,813 Notes discounted and loans, net Available-for-sale financial 28,166,681 - - 28,166,681 Available-for-sale financial assets assets Held-to-maturity investments 3,473,329 - - 3,473,329 Held-to-maturity investments Other financial assets, net 4,406,910 - - 4,406,910 Other financial assets, net Properties and equipments 5,989,662 - 1,056,913 7,046,575 Properties and equipments a), m) Goodwill and intangible assets 1,578,371 - (158,909) 1,419,462 Goodwill and intangible assets m) Other assets 2,747,198 27,626 (1,935,204) 839,620 Other assets a), b), c), d), h), j), k) - - 1,174,158 1,174,158 Deferred income assets b), d), h), j), k)

Total assets $ 633,650,280 $ 27,626 $ 136,958 $ 633,814,864 Total assets

Liabilities Liabilities

Due to Central Bank of China $ 3,221,695 $ - $ - $ 3,221,695 Due to Central Bank of China and banks and banks Financial liabilities at fair value 1,245,021 - - 1,245,021 Financial liabilities at fair value through profit or loss through profit or loss Notes issued under repurchase 3,731,418 - - 3,731,418 Notes issued under repurchase agreements agreements Payables 11,427,485 (37,907) (14,620) 11,374,958 Payables b), h), n) - - 14,620 14,620 Income tax liabilities, current n) Customer deposits and 556,229,846 - - 556,229,846 Customer deposits and remittances remittances Financial debentures 23,800,000 - - 23,800,000 Financial debentures Accrued pension liability 222,853 195,809 17,794 436,456 Provision c), d) Other financial liabilities 912,976 - - 912,976 Other financial liabilities Other liabilities 1,086,263 81,498 (240,164) 927,597 Other liabilities f), h) - - 359,328 359,328 Deferred income tax liabilities f), k) Total liabilities 601,877,557 239,400 136,958 602,253,915 Total liabilities

Shareholder’s equity Equity

Capital stock Capital stock Common stock 22,212,780 - - 22,212,780 Common stock Capital surplus Capital surplus Premium on capital stock 365,754 - - 365,754 Premium on capital stock Retained earnings - Retained earnings Legal reserve 2,206,110 - - 2,206,110 Legal reserve Special reserve 60,508 - - 60,508 Special reserve Unappropriated retained 5,692,418 (96,282) - 5,596,136 Unappropriated retained b), d), e), f), g), h), earnings earnings j) Other adjustments on Other equity stockholder’s equity Unrealized revaluation 234,631 (234,631) - - f) increment Cumulative translation 8,564 (18,160) - (9,596) Exchange differences on g) adjustments translation of foreign operations Unrealized gain from 1,151,794 (22,537) - 1,129,257 Unrealized gain from e), j) available-for-sale financial available-for-sale financial assets assets Net loss not recognized as (159,836) 159,836 - - c) pension cost Total stockholder’s equity 31,772,723 (211,774) - 31,560,949 Total equity

Total $ 633,650,280 $ 27,626 $ 136,958 $ 633,814,864 Total

3) The reconciliation of consolidated statements of comprehensive income for the year ended December 31, 2012

Change to IFRSs Difference in ROC GAAP Recognition and Difference in IFRSs Item Amount Measurement Presentation Amount Item Notes

Interest income $ 12,438,261 $ - $ (45,033) $ 12,393,228 Interest income l) Interest expenses (4,805,041) - - (4,805,041) Interest expenses Net interest income 7,633,220 - (45,033) 7,588,187 Net interest income Net income (loss) excluding Net income (loss) excluding interest revenue interest revenue Service fees, net 2,446,689 (7,683) - 2,439,006 Service fees, net h), j) Gain on financial assets and 459,479 1,704 45,033 506,216 Gain on financial assets and j), l) liabilities at fair value liabilities at fair value through profit or loss through profit or loss (Continued) 109

- 87 - Change to IFRSs Difference in ROC GAAP Recognition and Difference in IFRSs Item Amount Measurement Presentation Amount Item Notes

Realized gain on $ 916,705 $ 3,195 $ - $ 919,900 Realized gain on e) available-for-sale financial available-for-sale financial assets assets Gain on foreign exchange, 18,815 - - 18,815 Gain on foreign exchange, net net Gain on recovery of 228,026 - - 228,026 Gain on recovery of impairment loss impairment loss Other gains (loss) (67,433) - 4,872 (62,561) Other gains (loss) i) Net revenue 11,635,501 (2,784) 4,872 11,637,589 Net revenue Bad debt expense (700,860) - - (700,860) Bad debt expense Operating expenses Operating expenses Personnel expenses (3,486,427) 27,393 - (3,459,034) Employee benefits expenses b), d) Depreciation and (330,517) - (5,298) (335,815) Depreciation and a) amortization amortization Business expenses and (2,288,230) (3,152) 5,298 (2,286,084) Business expenses and a), j) general and administrative general and administrative expenses expenses Total operating expenses (6,105,174) 24,241 - (6,080,933) Total operating expenses Income before income tax 4,829,467 21,457 4,872 4,855,796 Income before income tax Income tax expense (566,069) (3,622) (4,872) (574,563) Income tax expense b), d), h), i) Net income $ 4,263,398 $ 17,835 $ - 4,281,233 Net income Other comprehensive income (9,596) Exchange differences on g) translation of foreign operations 529,195 Unrealized gain (losses) on e), j) available-for-sale financial assets (74,327) Actuarial gains arising from d) defined benefit plans 445,272 Other comprehensive income, for the year

$ 4,726,505 Total comprehensive income (Concluded)

4) Exemptions under IFRS 1

IFRS 1 recognized by the FSC establishes the procedures for the Bank’s first consolidated financial statements prepared in accordance with IFRSs. According to IFRS 1, the Group is required to determine the accounting policies under IFRSs and retrospectively apply those accounting policies in its opening balance sheet at the date of transition to IFRSs, January 1, 2012; except for optional exemptions and mandatory exceptions to such retrospective application provided under IFRS 1. The major optional exemptions the Group adopted are summarized as follows:

Business combinations

The Group elected not to apply FSC-recognized IFRS 3 “Business Combinations” retrospectively to business combination that occurred before the date of transition to IFRSs. Thus, there was no adjustment to book value for business combination that occurred before the date of transition.

Deemed cost

The Group elected to use ROC GAAP revaluation of property and equipment at, or before, the date of transition to IFRSs as deemed cost at the transition date. Other property and equipment and intangible assets were accounted under IFRSs retrospectively.

Employee benefits

The Group elected to recognize all cumulative actuarial gains and losses and transferred them to retained earnings at the date of transition.

Cumulative translation differences

The Group elected to deem as zero cumulative translation differences on all foreign operations at the date of transition to IFRSs. Afterwards, the exchange differences will be processed according to FSC-recognized IAS 21 “The Effects of Changes in Foreign Exchange Rates” recognized by Financial Supervisory Commission. 110

- 88 - The effects of the adoption of the abovementioned optional exemptions are discussed below in item 6) - Explanations of significant reconciling items in the transition to IFRSs.

5) Appropriation for special reserve

Under the FSC Order No. Jin-Guan-Zheng-Fa 1010012865 issued on April 6, 2012, the Bank reclassified unrealized revaluation increment and cumulative translation adjustments to retained earnings. The amount reclassified to retained earnings is appropriated to special reserve. However, if the amount of the increase in retained earnings from the first-time adoption of IFRSs is less than the amount reclassified to retained earnings, then the appropriation to special reserve is limited to the amount of the increase in retained earnings. Upon subsequent usage, disposal or reclassification of the related assets, special reserve shall be proportionately reversed to retained earnings. Since the amount of the increase in retained earnings from the first-time adoption of IFRSs is less than the amount reclassified to retained earnings, no special reserve was appropriated as of January 1, 2013.

6) Explanations of significant reconciling items in the transition to IFRSs

Material differences between the accounting policies under ROC GAAP and the accounting policies adopted under IFRSs were as follows:

a) Under ROC GAAP, non-operating assets is classified under other assets. By contrast, under IFRSs, such assets are used for rental earning and assets increment, and should be classified under investment properties. However, non-operating assets of the Bank are not used for earning rental and assets increment. Therefore, as of January 1, 2012 and December 31, 2012, other asset was reclassified to properties and equipments by$919,900 thousand and $898,004 thousand, respectively. For the year ended December 31, 2012, business expenses and general and administrative expenses was reclassified to depreciation by $5,298 thousand.

b) Under ROC GAAP, accrual for accumulated compensated absences is not addressed in existing. By contrast, under IFRSs, when the employees render services that increase their entitlement to future compensated absences, it should be recognized as the expected cost of employee benefits. Therefore, accrued expense increased by $37,259 thousand, unappropriated retained earnings decreased by $37,259 thousand, and deferred income tax asset and retained earnings increased by $6,334 thousand.

For the year ended December 31, 2012, according to actual unused compensated absences, both salary expense and accrued expense increased by $244 thousand, deferred income asset increased and income tax expense decreased by $41 thousand.

c) Under ROC GAAP, the lowest pension liability is recognized as minimum of accrued pension liability. Under IFRSs, there is no rule about the lowest pension liability. Therefore, as of January 1, 2012 and December 31, 2012, deferred pension cost decreased by $41,621 thousand and $33,263 thousand, net loss not recognized as pension cost decreased by $84,931 thousand and $159,836 thousand, and provision decreased by $126,552 thousand and $193,099 thousand, respectively. In addition, guarantee reserve is part of provision. Therefore, as of January 1, 2012 and December 31, 2012, guarantee reserve was reclassified to provision by $14,232 thousand, and provision increased by $1,114 thousand and $3,562 thousand, respectively according to defined benefit report.

d) Under ROC GAAP, unrecognized transition obligation should be amortized by straight line method and recognized as pension cost. By contrast, under IFRSs, unrecognized transition obligation should be adjusted to retained earnings.

111

- 89 - Under ROC GAAP, actual gains and losses is recognized as profit or loss. By contrast, under IFRSs, actual gains and losses of defined benefit plan is recognized as comprehensive income, as retained earnings under equity, and it can’t be reclassified to profit or loss in subsequent periods.

As January 1, 2012 and December 31, 2012, provision increased by $342,218 thousand and $314,581 thousand, deferred income tax asset increased by 58,177 thousand and $53,479 thousand, respectively. In addition, for the year ended December 31, 2012, pension cost decreased by $27,637 thousand, income tax expense increased by $4,698 thousand and both provision and actual loss arising from defined benefit plans increased by $74,327 thousand.

e) Under ROC GAAP, dividend of available-for-sale financial assets is recognized as income, and declared portion has been excluded before investment. By contrast, under IFRSs, there is no rule about declared portion excluded before investment. Therefore, as of December 31, 2012, unrealized gain of available-for-sale financial assets decreased and retained earnings increased by $22,385 thousand.

For the year ended December 31, 2012, the Bank disposed above financial assets. Therefore, realized gain of available-for-sale financial assets decreased and unrealized loss from valuation increased by $3,195 thousand.

f) Under ROC GAAP, reserve for land revaluation increment tax is classified under long-term liability. By contrast, under IFRSs, the Bank used the revalued amount as the cost of the assets at the date of transition to IFRSs. Therefore, as of January 1, 2012 and December 31, 2012, reserve for land revaluation increment tax was reclassified to deferred income tax liability by $222,370 thousand.

Under ROC GAAP, properties and equipments can be revalued by rule. By contrast, under IFRSs, properties and equipments subsequent evaluation is adopted by cost, it can’t be revalued. Therefore, as of December 31, 2012 and January 1, 2012, revaluation increment was reclassified to retained earnings by $234,631 thousand.

g) The Bank elected to reset the cumulative translation differences to zero at the date of transition to IFRSs, and the recognition has been used to increase accumulated earnings as of January 1, 2012. The gain or loss on any subsequent disposals of any foreign operations shall exclude cumulative translation differences that arose before the date of transition to IFRSs. Therefore, as of December 31, 2012 and January 1, 2012, cumulative translation adjustments decreased and retained earnings increased by $18,160 thousand.

For the year ended December 31, 2012, for the exchange differences on translating foreign operations increased by $9,596 thousand.

h) Under ROC GAAP, bonus point is recognized as promotion expenses when it generated. Under IFRSs, bonus point should be recognized as income when it realized. Therefore, accrued expenses decreased and retained earnings increased by $75,410 thousand, and retained earnings decrease and advance receipts increased by 75,410 thousand.

According to actual occurrence, advance receipts increased and service fee income decreased by $6,088 thousand, and deferred income tax assets increased and income tax expense decreased by $1,035 thousand.

i) Under IFRSs, land value increment tax is classified under income tax expenses. Therefore, for the year ended December 31, 2012, land value increment tax issued by the Bank was reclassified to income tax expenses by $4,872 thousand.

112

- 90 - j) Under ROC GAAP, transaction cost of financial assets/liabilities at fair value through profit or loss can be classified under original cost. By contrast, under IFRSs, original cost should exclude transaction cost. Therefore, for the year ended December 31, 2012, service fees increased by $1,595 thousand, business expenses and general and administrative expenses increased by $3,152 thousand, gain on financial assets and liabilities at fair value through profit or loss increased by $1,704 thousand and unrealized valuation of available-for-sale financial assets increased by $3,043 thousand, respectively.

k) Under ROC GAAP, allowance valuation is recognized after reliability of deferred income tax asset being estimated. By contrast, under IFRSs, only income tax benefit is recognized as deferred income tax asset when it is possible to realize, no longer use allowance valuation items.

In addition, under ROC GAAP, deferred income tax asset and liability is offset to show net amount. By contrast, under IFRSs, deferred tax assets and deferred tax liabilities should show separately.

As of December 31, 2012 and January 1, 2012, deferred income asset was reclassified to deferred liability by $122,419 thousand and $136,958 thousand, respectively.

l) Under the requirements of Financial Reports by Public Banks, interest income and expense are classified under financial assets at fair value through profit or loss. Therefore, for the year ended December 31, 2012, interest income was reclassified to financial assets at fair value through profit or loss by $45,033 thousand.

m) Under ROC GAAP, deferred charges were classified under other assets. By contrast, under IFRSs, deferred charges should be reclassified to properties and equipments. Therefore, as of December 31, 2012 and January 1, 2012, deferred charges were reclassified to properties and equipments by $154,407 thousand and $158,909 thousand.

n) Under ROC GAAP, current income tax asset and liability is classified under receivable. By contrast, under IFRSs, they are should be show separately. Therefore, as of December 31, 2012 and January 1, 2012, current income tax asset was reclassified by $1,148,551 thousand and $383,609 thousand, and current income tax liability was reclassified by $16,752 thousand and $14,620 thousand.

7) The explanations of significant adjustments of consolidated statement of cash flows

According to ROC GAAP, interest paid and received and dividends received are classified as operating activities while dividends paid are classified as financing activities. Additional disclosure is required for interest expenses when reporting cash flow using indirect method. However, under IAS 7” Statement of Cash Flow”, cash flows from interest and dividends received and paid shall each be disclosed separately. Each shall be classified in a consistent manner from period to period as operating, investing or financing activities. Therefore, interests and dividends received by the Bank of $12,286,793 thousand and $707,843 thousand, respectively, for the year ended December 31, 2012 were presented separately at the date of transition to IFRSs.

Except for the above differences, there are no other significant differences between ROC GAAP and IFRSs in the consolidated statement of cash flows.

113

- 91 - (Note 4) ------(Continued) 3 3 APPENDIX Total Sales or Total Sales Assets % to ------Payment Terms Payment 5 63 63 655 918 65 918 575 (Note 3) 1,555 8,478 1,887 5,000 8,478 1,555 3,000 1,887 1,209 6,890 3,600 62,390 62,390 292,234 121,546 348,722 287,234 118,546 348,722 289,580 206,862 $ ETWEEN THEM Amount Transaction Details Transaction Financial Statement Account ayables Customer deposits and remittances and deposits Customer Receivables expense Interest fees Service remittances and deposits Customer Receivables expense Interest fees Service expense Interest fees Service equivalents cash and Cash deposit Restricted Payables costs Operating income Interest equivalents cash and Cash deposit Restricted P costs Operating income Interest income Interest costs Operating remittances and deposits Customer Receivables receivables Other expense Interest fees Service revenue interest excluding income Net - 92 - 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 1 1 1 1 1 1 (Note 2) (Note Relationship WEEN EACH SUBSIDIARY, AND SIGNIFICANT TRANSACTIONS B ND SUBSIDIARIES Counterparty Shin Kong Marketing Consultant Co., Ltd. Co., Consultant Marketing Kong Shin Ltd. Co., Agency Insurance Kong Shin Ltd. Co., Agency Insurance Property Kong Shin Ltd. Co., Bank Commercial Kong Taiwan Shin Ltd. Co., Bank Commercial Kong Taiwan Shin Ltd. Co., Bank Commercial Kong Taiwan Shin Ltd. Co., Consultant Marketing Kong Shin 2 13 AND 2012 13 AND , 2013 , 201 Investee Company Investee December 31 December 31 December ended ended Year Year Ltd. Co., Bank Commercial Kong Taiwan Shin Ltd. Co., Consultant Marketing Kong Shin Ltd. Co., Agency Insurance Kong Shin Ltd. Co., Agency Insurance Property Kong Shin Year Ltd. Co., Bank Commercial Kong Taiwan Shin 0 1 2 3 0 ote 1) No. (N TAIWAN SHIN KONG COMMERCIAL BANK CO., LTD. A THE BUSINESS RELATIONSHIPBETWEEN THEPARENT AND THE SUBSIDIARIES AND BET YEARS ENDED DECEMBER 31, 20 (In Taiwan New of Thousands Dollars) 114 (Note 4) ------3 3 (Concluded) Total Sales or Total Sales Assets % to , 2013 and 2012. and , 2013 ------Payment Terms Payment 727 720 200 575 720 727 200 December 31 December ended (Note 3) 9,025 2,509 5,000 6,890 3,600 1,209 3,000 9,025 2,509 61,765 61,765 116,247 346,623 284,580 206,862 113,247 346,623 years $ Amount r the , 2013 and 2012. and 2012. , 2013 Transaction Details Transaction 1 rating revenues fo revenues rating quivalents nancial Statement Account Fi payables Customer deposits and remittances and deposits Customer Receivables expense Interest fees Service revenue interest excluding income Net remittances and deposits Customer Receivables fees Service equivalents cash and Cash Other deposit Restricted Payables costs Operating expenses Operating income Interest equivalents cash and Cash deposit Restricted Payables costs Operating expenses Operating income Interest e cash and Cash Payables costs Operating - 93 - 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 December 3 of December as assets of total consolidated the by count (Note 2) (Note Relationship or cost or expense account by the consolidated total ope total the consolidated by account or expense cost or Counterparty td. dividing the amount of a particular asset or liability ac liability or asset particular a of amount the dividing Shin Kong Insurance Agency Co., Ltd. Co., Agency Insurance Kong Shin Ltd. Co., Agency Insurance Property Kong Shin Ltd. Co., Bank Commercial Kong Taiwan Shin Ltd. Co., Bank Commercial Kong Taiwan Shin Ltd. Co., Bank Commercial Kong Taiwan Shin ted by dividing the amount of a particular revenue particular a of the dividing amount by ted s: e identified and numbered (in first column) and e (in identified as numbered first follows: column) on Investee Company Investee From a parent company to its subsidiary a parent company From “0” for Taiwan Shin Kong Commercial Bank Co., L Co., Bank Commercial Kong Taiwan Shin “0” for Shin Kong Marketing Consultant Co., Ltd. Co., Consultant Marketing Kong Shin Ltd. Co., Agency Insurance Kong Shin Ltd. Co., Agency Insurance Property Kong Shin Percentage to consolidated total revenues is calcula revenues total to consolidated Percentage b. company. to its parent a subsidiary From c. subsidiaries. Between a. a. b. “1”. from numbered are Subsidiaries 1 2 3 ote 1) No. (N Note 3:consolidati on been eliminated Have Note 4: by is calculated total assets to consolidated Percentage Note 2:Note follow as categorized are transactions of Flow Note Note 1: ar transactions to the intercompany Parties 115 Head Office and Branches

BRANCH NAME ADDRESS TEL

1F,3-5F, 20-21F, No.36, 3-5F, 20-21F, No.32 and 3F-1, No.32, 4F-1, No.32, 5F-1, Head Office 886-2-87587288 No.32, Songren Road, Xinyi District, Taipei, Taiwan

International Banking Dept. 5F, No. 99, Sec.1, Hsin Sheng South Rd., Taipei City 10652, Taiwan, (R.O.C.) 886-2-87710666

Trust Dept. 2-3F, No. 99, Sec.1, Hsin Sheng South Rd., Taipei City 10652, Taiwan,(R.O.C.) 886-2-87717888

Wanhua Branch No.134, Sichang St., Wanhua District, Taipei City 10848, Taiwan (R.O.C.) 886-2-23812160

Dong Taipei Branch 1F, No.29, Lane 11, Guang Fu North Rd., Taipei City 10560, Taiwan (R.O.C.) 886-2-27685966

Lung Shan Branch No.207, Kangding Rd., Wanhua District, Taipei City 10852, Taiwan (R.O.C.) 886-2-23023531

Hsi Yuan Branch No.131, Sec. 2, Hsi Yuan Rd., Taipei City 10859, Taiwan (R.O.C.) 886-2-23061271

Hsi Men Branch No.73, Sining S. Rd., Wanhua District, Taipei City 10842, Taiwan (R.O.C.) 886-2-23145791

No.269, Sec. 3, Chongcing N. Rd., Datong District, Taipei City 10369, Taiwan Da Tung Branch 886-2-25974951 (R.O.C.)

Fu Hsing Branch No.311, Fusing N. Rd., Songshan District, Taipei City 10544, Taiwan (R.O.C.) 886-2-27150825

Chung Hsiao Branch 1F., No.160, Yanji St., Da-an District, Taipei City 10696, Taiwan (R.O.C.) 886-2-27410101

No.76, Lane 356, Longjiang Rd., Jhongshan District, Taipei City 10474, Taiwan Wu Chang Branch 886-2-25059161 (R.O.C.)

1F., No.162, Songjiang Rd., Jhongshan District, Taipei City 10459, Taiwan Cheng Pei Branch 886~2-25652711 (R.O.C.)

No.115, Sec. 1, Chongcing S. Rd., Jhongjheng District, Taipei City 10045, Taiwan Cheng Nei Branch 886-2-23814518 (R.O.C.)

886-2-2790 Hsin Hu Branch 1-2F., No.87, Sinhu 2nd Rd., Neihu District, Taipei City 11494, Taiwan (R.O.C.) 1800

No.241, Sec.5, Nanjing E. Rd., Songshan District, Taipei City 10569, Taiwan(R. Song An Branch 886-2-25287879 O.C.)

Cin Cheng Branch No.1-1, Cingcheng St., Songshan District, Taipei City 10547, Taiwan (R.O.C.) 886-2-27199811

No.17, Lane 360, Sec. 1, Neihu Rd., Neihu District, Taipei City 11493, Taiwan Nei Hu Branch 886-2-27976768 (R.O.C.)

Chuang Chin Branch No.330, Jhuangjing Rd., Sinyi District, Taipei City 11050, Taiwan (R.O.C.) 886-2-23451888

116 BRANCH NAME ADDRESS TEL

2F., No.510, Sec. 5, Jhongsiao E. Rd., Sinyi District, Taipei City 11077, Taiwan Sung Shan Branch 886-2-23466636 (R.O.C.)

1-2F., No.218, Chongyang Rd., Nangang District, Taipei City 11573, Taiwan Nan Gang Branch 886-2-27821787 (R.O.C.)

Lin Sen N Road Branch No.554, Linsen N. Rd., Jhongshan District, Taipei City 10453, Taiwan (R.O.C.) 886-2-25861991

1F., No.177, Sec. 2, Fusing S. Rd., Da-an District, Taipei City 10667, Taiwan Da An Branch 886-2-27551639 (R.O.C.)

Hsin Chu Branch No.84, Jhongshan Rd., Hsinchu City 30046, Taiwan (R.O.C.) 886-3-5215171

Jhong Li Branch No.201, Jhongshan Rd., Jhongli City, Taoyuan County 32044, Taiwan (R.O.C.) 886-3-4270123

Tao Yuan Branch No.207, Fusing Rd., Taoyuan City, Taoyuan County 33066, Taiwan (R.O.C.) 886-3-3316996

No.102, Sec. 1, Chongsin Rd., Sanchong District, New Taipei City 24142, Taiwan Dong San Chung Branch 886-2-29737788 (R.O.C.)

Chu Pei Branch No.372, Jhonghua Rd., Jhubei City, Hsinchu County 30252, Taiwan (R.O.C.) 886-3-5552058

Lien Cheng Road Branch No.166, Liancheng Rd., Jhonghe District, New Taipei City 23553, Taiwan (R.O.C.) 886-2-22477330

Chu Ke Branch No.333, Sec. 1, Guangfu Rd., Hsinchu City 30074, Taiwan (R.O.C.) 886-3-5678989

No.122, Sec. 3, Jincheng Rd., Tucheng District, New Taipei City 23643, Taiwan Tu Cheng Branch 886-2-22705050 (R.O.C.)

Lu Chou Branch 1F., No.101, Fusing Rd., Lujhou District, New Taipei City 24753, Taiwan, (R.O.C.) 886-2-82813182

No.73, Sec. 1, Chongcing N. Rd., Datong District, Taipei City 10350, Taiwan Chien Cheng Branch 886-2-25567227 (R.O.C.)

Pei San Chung Branch No.115, Siwei St., Sanchong District, New Taipei City 24155, Taiwan (R.O.C.) 886-2-29875522

Yung Ho Branch No.411, Jhongjheng Rd., Yonghe District, New Taipei City 23455, Taiwan (R.O.C.) 886-2-32335656

Sin Pu Branch No.21, Yunong Rd., Banciao District, New Taipei City 22049, Taiwan (R.O.C.) 886-2-22521919

Taichung Branch No.101, Taichung Rd., East District, Taichung City 40146, Taiwan (R.O.C.) 886-4-22284113

Chung Kang Branch No.769, Sec. 4, Taiwan Blvd., Situn District, Taichung City 40755, Taiwan (R.O.C.) 886-4-23588211

Zuoying Huasia Rd. Branch No.692, Huasia Rd., Zuoying District, Kaohsiung City 81368, Taiwan (R.O.C.) 886-7-3487077

117 BRANCH NAME ADDRESS TEL

Da Chia Branch No.36, Zhongxiao St., Dajia Dist., Taichung City 43747, Taiwan (R.O.C.) 886-4-26760020

Da Dun Branch No.5, Sec.2, Gongyi Rd., Nantun District, Taichung City 40861, Taiwan (R.O.C.) 886-4-23296236

No.346, Sec. 2, Jhongshan Rd., Yuanlin Township, Changhua County 51049, Yuan Lin Branch 886-4-8377007 Taiwan (R.O.C.)

No.501, Sec. 2, Wucyuan W. Rd., Nantun District, Taichung City 40878, Taiwan Nan Tun Branch 886-4-23832121 (R.O.C.)

Dong Tainan Branch No.12, Sec. 1, Jhonghua E. Rd., East District, Tainan City 70155, Taiwan (R.O.C.) 886-6-2347777

Da Li Branch No.269, Defang S. Rd., Dali District, Taichung City 41284, Taiwan (R.O.C.) 886-4-24835123

No.162, Sec. 2, Songjhu Rd., Beitun District, Taichung City 40669, Taiwan Sung Chu Branch 886-4-22453456 (R.O.C.)

Chang Hwa Branch No.107, Sanmin Rd., Changhua City, Changhua County 50043, Taiwan (R.O.C.) 886-4-7235897

1F., No.116-1, Jhonghua Rd., Shulin District, New Taipei City 23860, Taiwan, Shulin Branch 886-2-86848777 (R.O.C.)

No.178, Sec. 1, Sihchuan Rd., Banciao District, New Taipei City 22063, Taiwan Hou Pu Branch 886-2-29617997 (R.O.C.)

Ku Ting Branch No.41, Sec. 2, Roosevelt Rd., Da-an District, Taipei City 10643, Taiwan (R.O.C.) 886-2-23432330

Hsih Lin Branch No.510, Wunlin Rd., Shihlin District, Taipei City 11159, Taiwan (R.O.C.) 886-2-28338789

1F, No.36, 3F, No.32, and 3F, No.36 Songren Rd., Xinyi District,Taipei City 11073, Business Department 886-2-87808667 Taiwan(R.O.C.)

No.665, Jhongjheng Rd., Sinjhuang District, New Taipei City 24257, Taiwan Dan Feng Branch 886-2-29083636 (R.O.C.)

No.422, Sec. 2, Jhongyang N. Rd., Beitou District, Taipei City 11258, Taiwan Peitou FushingKang Branch 886-2-28982399 (R.O.C.)

Hsin Sheng S. Road Branch 1F, No.101, Sec.1, Hsin Sheng South Rd., Taipei City 10652 , Taiwan, (R.O.C ) 886-2-87719099

1,2F, No.138, Jhong Shan Rd., Sin Ying District, Tainan City 73065, Taiwan, Sin Ying Branch 886-6-6378266 (R.O.C.)

B1, 1F, No.41-1, Sec. 7, Jhongshan N. Rd., Shihlin District, Taipei City 11156, Tien Mu Branch 886-2-28762126 Taiwan (R.O.C.)

118 BRANCH NAME ADDRESS TEL

1,2F, No.311,313, Jhongjheng Rd., Hsin Tien District, New Taipei City 23148, Hsin Tien Branch 886-2-89117180 Taiwan (R.O.C.)

Ta Chih Branch No. 600, Mingshui Rd., Zhongshan District, Taipei City 10462, Taiwan (R.O.C.) 886-2-85091819

Hsing Lung Branch 1F., No.133, Jinglong St., Wunshan District, Taipei City 11680, Taiwan (R.O.C.) 886-2-89311099

Pa Teh Branch No.1032, Sec. 2, Jieshou Rd., Bade City, Taoyuan County 33447, Taiwan (R.O.C.) 886-3-3658085

1F., No.100, Sec. 2, Chang-an E. Rd., Jhongshan District, Taipei City 10491, 886-2-25067366 Chang An Branch Taiwan (R.O.C.)

Chia Yi Branch No.248, Jhongshan Rd., Chiayi City 60041, Taiwan (R.O.C.) 886-5-2247755

1F, No.242, Sec.3, Jian Guo Rd., Feng Shan District, Kaohsiung City 83048, 886-7-7805966 Feng Shan Branch Taiwan, (R.O.C.)

Tainan Branch 1F, No.307, Sec.2, Ming Sheng Rd., Tainan City 70054, Taiwan (R.O.C.) 886-6-2219511

Pei Chia Yi Branch 1F., No. 467, Jhongsing Rd., West District, Chiayi City 60089, Taiwan (R.O.C.) 886-5-2330367

Tou Liu Branch No.225, Sec. 2, Yunlin Rd., Douliu City, Yunlin County 64041, Taiwan (R.O.C.) 886-5-5375586

No.159, Sec. 3, Huanshi Rd., Zhunan Township, Miaoli County 35045, Taiwan 886-37-466948 Zhunan Branch (R.O.C.)

Hua Lien Branch No.484, Jhongjheng Rd., Hualien City, Hualien County 97041, Taiwan (R.O.C.) 886-3-8310802

Keelung Branch No.259, Jen 1st Rd., Ren-ai District, Keelung City 20051, Taiwan (R.O.C.) 886-2-24213998

Yi Lan Branch No.48, Kungfu Rd., Yilan City, Yilan County 26043, Taiwan (R.O.C.) 886-3-9358178

San Shia Branch No.45, Fusing Rd., Sansia District, New Taipei City 23741, Taiwan (R.O.C.) 886-2-86717616

Lu Chu Branch No.1185, Jhongshan Rd., Lujhu District, Kaohsiung City 82151, Taiwan (R.O.C.) 886-7-6975395

No.349, Jhonghua 4th Rd., Cianjin District, Kaohsiung City 80146, Taiwan 886-7-2158811 Kaohsiung Branch (R.O.C.)

Hsin Chuang Branch No.252, Sintai Rd., Sinjhuang District, New Taipei City 24242, Taiwan (R.O.C.) 886-2-29965995

No.428, Sec. 2, Wunhua Rd., Banciao District, New Taipei City 22044, Taiwan 886-2-82586288 Jiang Tz Tsuei Branch (R.O.C.)

Nan Shih Jiau Branch No.347, Jingsin St., Jhonghe District, New Taipei City 23582, Taiwan (R.O.C.) 886-2-29484888

119 BRANCH NAME ADDRESS TEL

Mi Two Branch No.242, Jhongjheng Rd., Mituo District, Kaohsiung City 82743, Taiwan (R.O.C.) 886-7-6178407

Gan Shan Branch No.27,29, Minyou Rd., Gangshan Dist., Kaohsiung City 82051, Taiwan (R.O.C.) 886-7-6212551

North Kaohsiung Branch No.523, Minzu 1st Rd., Sanmin District, Kaohsiung City 80792, Taiwan (R.O.C.) 886-7-3478511

5F., No.99, Sec. 1, Sinsheng S. Rd., Da-an District, Taipei City 10652, Taiwan 886-2-87710666 Offshore Banking Unit (R.O.C.)

Siao Gang Branch No.292, Hanmin Rd., Siaogang District, Kaohsiung City 81256, Taiwan (R.O.C.) 886-7-8025588

No.126, Sec. 1, Jhonghua Rd., Central District, Taichung City 40041, Taiwan 886-4-22203176 Chung Hua Branch (R.O.C.)

No.318, Sec. 4, Cheng Teh Rd., Hsih Lin District, Taipei City 11168, Taiwan 886-2-28812628 Cheng Teh Branch (R.O.C.)

1F., No.243, Sec. 1, Dunhua S. Rd., Da-an District, Taipei City 10689, Taiwan 886-2-27513989 Dun Nan Branch (R.O.C.)

No.35-1, Sec. 3, Jhongshan Rd., Jhonghe District, New Taipei City 23546, Taiwan 886-2-82213878 Jhong He Branch (R.O.C.)

No.160-1, Sec. 2, Fusing Rd., South District, Taichung City 40252, Taiwan 886-4-22612516 Nan Taichung Branch (R.O.C.)

No.238, Sec. 2, Zhongqing Rd., Beitun District, Taichung City 40676, Taiwan 886-4-22910388 Shui Nan Branch (R.O.C.)

No.974, Sec. 4, Wunsin Rd., Beitun District, Taichung City 40654, Taiwan 886-4-22333626 Bei Tun Branch (R.O.C.)

Si Tun Branch No.63, Guangming Rd., Situn District, Taichung City 40757, Taiwan (R.O.C.) 886-4-27019551

No.116, Sec. 1, Siangshang Rd., West District, Taichung City 40358, Taiwan Siang Shang Branch 886-4-23056881 (R.O.C.)

Shih Chia Branch No.36, Jingwu E. Rd., East District, Taichung City 40147, Taiwan (R.O.C.) 886-4-22120606

No.193, Yuanhuan S. Rd., Fengyuan District, Taichung City 42041, Taiwan Fung Yuan Branch 886-4-25251201 (R.O.C)

Yung An Branch No.159-75, Sec. 3, Situn Rd., Situn District, Taichung City 40763, Taiwan (R.O.C.) 886-4-24616115

Ping Tung Branch No.123, Jhongjheng Rd., Pingtung City, Pingtung County 90074, Taiwan (R.O.C.) 886-8-7339911

120 BRANCH NAME ADDRESS TEL

Dong Yuan Branch No.63, Guangdong Rd., Pingtung City, Pingtung County 90051, Taiwan (R.O.C.) 886-8-7228306

No.256, Sec. 1, Wandan Rd., Wandan Township, Pingtung County 91341, Taiwan Wan Dan Branch 886-8-7772010 (R.O.C.)

No.249, Chi Hsien 1st Rd., Sinsing District, Kaohsiung City 80053, Taiwan Chi Hsien Branch 886-7-2361678 (R.O.C.)

No.68, Sec. 2, Hesheng Rd., Pingtung City, Pingtung County 90087, Taiwan Ho Sheng Branch 886-8-7529782 (R.O.C.)

No.146,148, Chung Hsing Rd., His Chih District, New Taipei City 22158, Taiwan Si Chih Branch 886-2-26959659 (R.O.C.)

1-3F., No.1080, Jhongjheng Rd., Taoyuan City, Taoyuan County 33045, Taiwan Tao Bei Branch 886-3-3465660 (R.O.C.)

Dong Sin Jhu Branch No.189, Jhong Yang Rd., Sin Jhu City 30041, Taiwan (R.O.C.) 886-3-5153288

No.100、102, Sec. 2, Jiouru Rd., Jiouru Township, Pingtung County 90442, Taiwan Jiou Ru Branch 886-8-7390985 (R.O.C.)

1-2F., No.659, Jhongjheng S. Rd., Yongkang District, Tainan City 71045, Taiwan Yong Kang Branch 886-6-2432877 (R.O.C.)

Li Hsin Branch No.121, Huansi Rd., Jhongli City, Taoyuan County 32053, Taiwan (R.O.C.) 886-3-4918787

Sha Lu Branch No.26, Rihsin St., Shalu District, Taichung City 43350, Taiwan (R.O.C.) 886-4-26625008

1-3F., No.1187, Sec. 3, Zhongqing Rd., Daya Dist., Taichung City 42878, Taiwan Ta Ya Branch 886-4-25650901 (R.O.C.)

No.146, Sec. 2, Taiping Rd., Cao Tun Township, Nan Tou County 54263, Cao Tun Branch 886-4-92328296 Taiwan(R.O.C.)

No.123, Sec. 2, Nanjing E. Rd., Jhongshan District, Taipei City 10485, Taiwan Nan Dong Branch 886-2-25167698 (R.O.C.)

Suites 1502-07, 15/F, Tower 2, The Gateway, 25 Canton Road, Harbour City, Hong Kong Branch 852-35574666 Kowloon, Hong Kong

Suites 1502-07, 15/F, Tower 2, The Gateway, 25 Canton Road, Harbour City, Hong Kong Branch 852-35574666 Kowloon, Hong Kong

May 31, 2014

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